The Central Bank of Nigeria has raised its monetary policy rate to 27.50 per cent.
The Monetary Poly Committee (MPC) of the Central Bank of Nigeria (CBN) during its 298th meeting on the 25th and 26th of November 2024 reviewed recent economic and financial developments, as well as assess the risks to the outlook. All twelve members of the committee were in attendance.
According to a communique titled – Monetary Policy Communique No. 155 and signed by the Governor of the Central Bank of Nigeria, Olayemi Cardodo, the committee was unanimous in its decision to further tighten policy.
The committee decided to raise MPR by 25 basis points to 27.50 per cent, from 27.25 per cent, while retaining the asymmetric corridor around the MPR at +500/-100 basis points.
The committee retained the Cash Reserve Ratio of Deposit Money Banks at 50.00 per cent and Merchant Banks at 16 per cent.
Liquidity Ratio was also retained at 30.00 per cent by the unanimous decision of the committee.
According to Cardoso, this meeting was held in the backdrop of renewed inflationary pressures, as the headline, food, and core measures rose year-on-year in October 2024. “
“The Committee was particularly concerned that all three measures also inched up on a month-on-month basis, suggesting the persistence of price pressures, with attendant adverse impacts on income and welfare of citizens. Members, therefore, agreed unanimously to remain focused in addressing price developments.”
While recognising the impact of food price uptick and the recent increase in the price of Petroleum Motor Spirit (PMS) on the general price level, members of the committee commended the efforts of the Federal Government in improving security in the North-East of the country, which will increase food production and the on-going deregulation of the downstream sub-sector of the petroleum industry that will eliminate scarcity when fully deregulated.
Cardoso said “The Committee noted the improvement in the external sector, reflected by the increase in the current account surplus, enhanced remittance, and capital inflows which have impacted the external reserves positively. This, therefore, suggests that key policy measures by both the monetary and fiscal authorities are yielding the desired outcomes. Members, however, expressed concern over persisting exchange rate pressure, reflecting continued high demand in the market. Consequently, the Committee urged the Bank to explore measures to boost market liquidity”
“Members noted with satisfaction the continued resilience and stability of the banking system despite significant exogenous and endogenous headwinds. Key financial soundness indicators such as the Capital Adequacy Ratio (CAR), Non-Performing Loan ratio (NPL), Liquidity Ratio (LR), amongst others, remain strong. The MPC, however, called on the Bank to maintain its close surveillance on the banking system to sustain compliance with regulatory thresholds and continued health of the industry.”
On the key developments in the domestic and global economies, the communique stated that data released by the National Bureau of Statistics showed that headline inflation (year-on-year) rose to 33.8 per cent in October 2024 from 32.70 percent in September 2024, from 2.52 per cent in the previous month, with both food and core components contributing to the continuous rise in headline inflation.
Food inflation rose further to 39.16 per cent in October 2024, from 37.77 per cent in September, while core inflation also rose to 28.37 per cent in October 2024, from 27.43 per cent in September
The communique also indicated a GDP growth by 3.46 per cent in the third quarter of 2024 compared with 3.19 and 2.54 per cent in the preceding and corresponding quarters, respectively.
The external reserves rose marginally to US$40.88 billion as at 21st November 2024 from US$40.06 billion at end-October 2024, available to finance 17 months of imports, the communique stated.
At the global level, the communique stated that IMF projects growth at 3.2 percent for 2024 and 2025 from 3.3 per cent in 2023. Risks to this outlook, however, include the lingering war between Russia and Ukraine, the crisis in the Middle East, as well as the growing risk of reversal as talks of trade tariffs heighten, following the outcome of the November 2024 United States elections.
Cardoso said that considering the above developments and identified risks, Members reiterated their commitment to price stability as the bedrock of a thriving Nigerian economy.
