September 25, 2024/United Capital Research
The 297th Monetary Policy Committee (MPC or the Committee) meeting held on 23 and 24 Sept-2024 saw a hike in Monetary Policy Rate (MPR or benchmark interest rate). The benchmark interest rate was increased by another +50bps from 26.75% to 27.25%. Notably, the banks were not spared, as the MPC also tightened the Cash Reserve Ratio of the banks.
For the commercial banks, the Committee expanded CRR by +500bps from 45.0%to 50.0%, while CRR for merchant banks was raised by +200bps from 14.0% to 16.0%. Other monetary policy tools were left unchanged. For instance, the Liquidity Ratio was retained at 30.0% and Asymmetric Corridor stable at+500/-100 basis around the MPR).
Key Fundamentals Behind the Committee’s Decision
Low Confidence in the Continuance of Recent Progress of Inflation:
The CBN Governor, Mr. Olayemi Cardoso indicated the Committee’s low confidence in the continuance of recent progress observed in inflation figures reported. Nonetheless, the Governor acknowledged the efficacy the recent monetary policies actions, stating that “the numbers clearly show we are in the right direction”.
Recently, the National Bureau of Statistics (NBS) revealed that the Nigeria’s headline inflation printed at 32.15% on a year-on-year (y/y) basis in Aug-2024, indicating a 125bps reduction from 33.40% y/y in Jul-2024.Notably, this marked the second successive month of slowdown on a year-on-year basis. Particularly, this was driven by the decline in food prices, supported by harvest period and fiscal interventions (150 days duty-free import window for select food items).
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