Decisions of CBN’s Monetary Policy Committee (MPC) of January 2022
• 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 that the output growth recovery was relatively strong in 2021 and is expected to progress reasonably in 2022 following considerable improvements in Q3 ’21 and positive outlook for Q4 ’21. However, this is hinged on the continued support of both the fiscal and monetary authorities to sustain the current momentum.
In addition, the committee noted concerns over the slight uptick in headline inflation (y/y) in December. However, the MPC noted that the headline inflation is expected to trend upwards in the short-term before moderating towards the first quarter of 2022, on the back of food harvest expected in Q1 ’22 as well as the the CBN’s sustenance of its intervention programs.
The committee noted the need to encourage the takeoff of private refineries across the country in order to provide alternative competitive, boost domestic supply and reduce the need for government interventions to manage fuel prices for domestic consumption. The MPC welcomed the improvement in foreign capital inflows through diaspora remittances and urged the CBN to further extend the incentives scope to attract more remittances.
The committee noted the positive performance in the equities market within the review period and commended the sustained investors’ confidence in Nigeria’s economy. Although the liquidity ratio remained well above the prudential limits, the capital adequacy ratio declined marginally in December ‘21. In addition, the MPC noted the sustained resilience of the banking system following the progressive improvement in the NPL ratio which declined from 5.01% in November ’21 to 4.85% in December ’21.
The MPC noted that loosening could trigger foreign exchange demand pressure as excess liquidity could be channelled to either increased importation or speculative holding of exchange rate leading to fx depreciation and inflation. The MPC also noted that tightening, given the fragile state of the current GDP growth rate, and potential domestic and external headwinds confronting the economy was not a feasible step to take.The MPC believes that a hold stance would indicate a conservative but cautious and consistent policy choice given the prevailing economic conditions and outlook.
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