At the 1^st MPC meeting of the year, the Committee unanimously voted to RAISE policy rate further by 100bps to 17.50% with other policy parameters unchanged.

Other parameters retained were:

• The asymmetric corridor of +100/-700 basis points around the MPR;
• The CRR at 32.50%; and
• The Liquidity Ratio at 30%.
  

Comment: At the just concluded meeting, 6 members voted for a 100bps hike in rates, 4 voted for 50bps rate increase while 1 voted for a 25bps raise. The decision to raise rates further was hinged on reining in inflation and consolidating on the progress made so far despite the 13bps decline to 21.34% y/y in December. Although a hold stance was considered by committee members; however, it was deemed too early as inflation remains very high and detrimental to the Nigerian economy. Taking a loosening stance was not considered by the committee as this would undermine the gains made from previous rate hikes. 

Contrary to our expectations of a hold or less aggressive stance, the committee resumed the year with another large rate hike to reduce the negative real return on investments and stem the elevated inflationary pressures. Looking ahead, we reiterate our opinion that inflation drivers are mostly tilted to the supply-side and existing structural inadequacies. Nevertheless, we expect further decline in year-on-year inflation figures at a moderate pace driven by the aggressive policy tightening and favourable base effect.