Nigeria’s central bank retains interest rate at 12%

The Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) has retained the Monetary Policy Rate (MPR) at 12 percent, against market expectations of a hike.

Nigeria is facing its worst economic crisis in decades, with low oil prices and policy uncertainties pushing growth in Africa’s largest economy to -0.36 percent in the first quarter of 2016. Inflation rose to 13.7 percent in April, accelerating for a sixth consecutive month and at the highest pace since August 2010, after an increase in gasoline and electricity prices. With this, the market expected an increase in rates, but the CBN held them.

The MPC also retained Cash Reserve Ratio (CRR) for commercial banks in Africa’s largest economy at 22.5 percent and Liquidity Ratio at 30 percent.

As part of its resolution at its May meeting, the MPC also embraced flexibility in the Foreign Exchange Market. Although details of this has not been communicated by the apex bank, Nigeria’s vice president, Prof. Yemi Osinbajo, said recently that the government believes “a more flexible” exchange rate policy is needed to stimulate the economy.