MAY 22, 2018: NIGERIAN CENTRAL BANK RETAINS 14% INTEREST RATE.

The Central Bank of Nigeria's Monetary Policy Committee at its 261st meeting has decided to retain basic financial rates as they have been for months now.

Specifically, the Monetary Policy interest rate was retained at 14%; cash reserve ratio stayed at 22.5% and liquidity ratio was retained at 30%.

This certainly must disappoint any one who was expecting at least some shift downwards for the interest rate since for two months now, the nation's inflation rate had stayed below 14% and still declining, albeit slowly.

In April, according to latest figure released by the National Bureau of Statistics, the inflation rate was down to 12.48%.

However, there is no doubt though that the CBN had reason to be cautious over the immediate future in spite of still rising crude oil prices and its impact on Nigeria's GDP and of course, the inflation rate continued decline.

Of top concern was the still fragile recovery of the economy as evidenced by reduced GDP growth for this year's first quarter; still growing sovereign debt profile ; security challenges and resultant impact on agricultural production and late passage of the 2018 budget.

The committee foresees inflationary pressures likely from once the ongoing minimum wage review is concluded; political campaign expenditures and the liquidity impact of the expansionist 2018 budget.

At the global level, much gradual easing of political tensions, financial conditions  etc give cause for hope, US China trade tensions, protectionist policies trigger by Donald Trump's presidency and the situation in the Middle East, give more  cause for concern.

For Nigeria, the relatively high interest rate remains good magnet for short term money from Europe, America and parts of Africa but it imposes heavy cost of funds burden on local businesses especially manufacturers and those that can not easily pass on higher cost to consumers.

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