May 25, 2023/CSL Research

• The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) raised the Monetary Policy Rate (MPR) by 50bps to 18.5% from 18.o% at its 3rd Monetary Policy Committee (MPC) meeting for the year 2023.  
• However, the MPC decided to retain all other parameters, keeping the asymmetric corridor at +100/-700 basis points around the MPR, the CRR at 32.5%, and the Liquidity Ratio at 30%.  

• We retain our view that the continuous hike in rate will keep constrain the country’s fragile output growth while having a minimal effect on inflation and attracting foreign inflows.

At the end of the third Monetary Policy Committee (MPC) meeting of 2023 yesterday afternoon, the MPC raised the MPR for the seventh consecutive time by 50bps to 18.5% from 18% previously. The CBN Governor noted that the decision to continue its contractionary monetary policy approach remains to stem inflation. Headline inflation rate was up 18bps to 22.22% in April 2023 from 22.04% in March 2023. The committee noted that loosening its monetary policy stance was not considered because it would compound the inflationary pressure and trigger further macroeconomic instability. According to the CBN, empirical counterfactual evidence of a ‘do-nothing’ approach projected the inflation would have been 30.48% instead 22.22%. We however retain our view that the impact on growth appears worse than the impact on reducing inflation.