CBN worries about Nigeria’s rising debt: keeps MPR at 11.5%.
CBN worries about Nigeria’s rising debt: keeps MPR at 11.5%. Nigeria’s fiscal headroom has been restricted due to the Covid-19 pandemic and instability of crude oil prices.
The Monetary Policy Committee of the Central Bank of Nigeria (CBN) expressed its concerns over the fiscal headroom of Nigeria because it has remained fragile and restricted due to the effects of the COVID-19 pandemic, unstable crude oil prices, and the constant increment in public debt, which hit N32.9 trillion around the 31st of December 2020.
This discovery was made while the bank maintained its standard interest rate, the Monetary Policy Rate (MPR), at 11.5 percent a Monetary Policy Committee (MPC) meeting took place in Abuja for 2 days due to the concerns of inflation.
The CBN Governor, Godwin Emefiele, included that the liquidity ratio will be maintained at 30 % and the cash reserve ratio (CRR) will remain at 27.5 % while announcing the committee’s decision.
According to Emefiele, six members voted to maintain all parameters while three members voted to increase the MPR. The major interest rate in an economy is the Monetary Policy Rate (MPR). And it is used for fixing other trading interest rates in the economy. However, this is no surprise to most analysts in the financial services sector who predicted that the decision will be held based on recent Q4 2020 numbers with real GDP growth increasing minimally by 0.11 percent yearly (y/y) as opposed to -3.62 percent recorded in Q3 2020.
For instance, last week, Cordros Research had said it expected members of the committee to vote for a “HOLD” decision, adding that a lot of members are of the opinion that the MPC still needs to sustain its welcoming monetary stance, despite the increasing pressure caused by inflation, to ensure economic growth and gain more stability.
After publicizing the committee’s choice, Emefiele said the apex bank was not interested in making life difficult for Nigerians and businesses operating in the country by increasing the key interest rate. He stressed that increasing the MPR will raise the cost of borrowing and limit access to credit for businesses which he explained may change the growth tendency of the economy.
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