CBN holds key rates, says current recession will be short

The Central Bank Nigeria (CBN), rising from its 276th Monetary Policy Committee (MPC) meeting on Tuesday, decided to retain the benchmark interest rate to allow previous cuts to flow through the economy, saying a recession should be over by the end of the year.

All 10 members of the monetary policy committee who attended the two-day meeting voted to keep the rate at 11.5 per cent, Governor Godwin Emefiele said Tuesday in a virtual briefing from the capital, Abuja.

The apex bank expects the nation’s second recession in less than four years to be short-lived, echoing remarks by Finance Minister Zainab Ahmed on Monday. The economy contracted 3.6 per cent in the third quarter from a year earlier after crude output dropped to the lowest since 2016.

Speaking while the CBN decided to hold the rate, Emefiele said holding rates “will allow current policy measures to permeate the economy”.

Although inflation has been above the central bank’s target band of 6 per cent to 9 per cent for more than five years, and quickened for a 14th straight month in October, this should start moderating in the medium term, according to the MPC. Food-price growth, that has been a key driver, is expected to ease, Emefiele said.

The committee kept the cash reserve requirement at 27.5 per cent, held the liquidity ratio at 30 per cent and retained the asymmetric corridor, which means the cost at which lenders borrow is at 100 basis points above the monetary policy rate and the return on their deposits at 700 basis points below the benchmark.