MPC Decision – September 2021

• Decision (unanimous)
  Retain MPR at 11.50%
• Retain the asymmetric corridor of the MPR at +100 / -700 basis point.
• Retain CRR at 27.5%.
• Retain liquidity ratio at 30%.

The MPC noted the recovery in output growth in Q2 ’21 as well as improving headline PMI readings in the months within Q2 ‘21. It noted the moderate but steady decline in prices as inflation declined for the fifth consecutive month, with forecasts indicating a continued downward trend.

The MPC noted the contribution of poor infrastructure to rising domestic price levels, reiterating their call to the FGN to prioritize investment in public infrastructures such as improved transportation networks, power supply, and telecommunications facilities. Funding for such projects has a multiplier effect on other sectors of the economy and could be sourced through public/private partnerships as well as the issuance of diaspora bonds. The committee emphasised the complementary role the diaspora bonds would play in boosting exchange rate supply, improving accretion to reserves, and easing the exchange rate pressure.

The committee noted the moderate improvement in the equities market and commended the sustained investment confidence in the Nigerian economy but called on the FGN to continue to improve the ease of doing business in Nigeria. The committee also noted that the capital adequacy ratio and liquidity ratio both remained above the prudential limits in the banking system. In addition, the MPC noted that the NPL ratio showed progressive improvement compared to the same period last year. However, the MPC urged banks to sustain their tight prudential regime so as to bring NPLs below the 5% regulatory benchmark.

The MPC noted that tightening the rates could limit excess liquidity and thus reduce demand in the foreign exchange market, reduce money supply, and inhibit deposit money banks from creating credit needed to stimulate manufacturing output needed to moderate prices. On the other hand, loosening could exacerbate inflationary pressures, increase negative real interest returns, and discourage domestic investments. However, holding would encourage continued permeation of policy measures in supporting recorded growth and macroeconomic stability.