In the 3^rd MPC meeting of the year, the Committee unanimously voted to RAISE policy rate further by 50bps to 18.50% 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, 10 members voted for a 50bps hike in rates, 1 voted for 25bps rate increase, 1 voted for a hold, and all voted for other parameters remaining at status quo. At the meeting, the MPC noted that despite the policy tightening adopted in recent months, inflation remains high due to non-monetary factors such as insecurity and PMS scarcity and high energy prices, however, the rate of increase in inflation was said to have moderated. On raising rates, the committee decided unanimously to tighten further by 50bps due to high inflationary pressures and its adverse effect on growth and the need to bridge the negative real return margin on investments. A loose or hold stance was also considered but was not implemented as this would jeopardize the progress made so far on moderating the rate of increase in inflation. Specifically, inflation could have surpassed 30% if the committee had not been aggressive in the last one year, according to the CBN.

Going forward, we expect the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to continue to toe the contractionary policy path, however at subdued pace as inflation remains significantly high. However, just like the CBN Governor alluded, we opine that major drivers of inflationary pressures in Nigeria are supply-side driven and would require fiscal policy actions to support efforts made so far by the monetary policy authorities.