May 24, 2022/InvestmentOne Update
In the 3rd MPC meeting for the year, the Committee unanimously voted to RAISE policy rate by 150bps to 13.50% with other policy parameters unchanged. This is the first time the Apex Bank will be taking a hawkish policy stance since its July meeting in 2016.
Other parameters retained were:
- The asymmetric corridor of +100/-700 basis points around the MPR;
- The CRR at 27.50%; and
- The Liquidity Ratio at 30%.
Comment: While we expected a slight monetary policy tightening given the previously accommodative position of the committee on consolidating economic growth, we highlight that the committee’s position was aggressively hawkish. At the just concluded meeting, 6 members voted for a 150bps hike in rates, 4 voted for a 100bps hike and 1 voted for a raise of 50bps. We opine that the decision of the MPC was necessitated given the surging inflationary pressures witnessed in the past three consecutive months, capital outflows stemming from policy normalisation in global economies and its attendant impact on the exchange rate. In addition, this signals the disposition that the CBN has not left out its primary objective of maintaining price stability.
