By Oludare Mayowa
The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) raised its interest rate by 100 basis points to 17.5 percent on Tuesday.
Speaking at the end of the MPC two-day meeting in Abuja, the Governor, Godwin Emefiele said members of the monetary policy committee did not think the decline in inflation was big enough to justify either holding or cutting the rate.
Nigeria’s inflation declined for the first time in 11 months in December to 21.34 percent from a 17-year peak of 21.47 previous figure.
But the CBN Governor, Emefiele said while the decline in inflation rate was a result of the impact of its policy, but believed ‘it’s not time to celebrate.’
“The MPC was, therefore, unanimous in its position to continue to tighten. However, the dilemma at this meeting was whether to continue tightening aggressively or moderately.
“To the Committee, a moderate tightening may slow the rate of deceleration in inflation without necessarily hurting output. For those members who felt that an aggressive stance was needed, they were of the view that Nigeria’s inflation at a rate above 20 percent, was already a threat to growth and among the highest in the world.
“To this group of members, aggressively raising the policy rate was paramount to reining in inflation because an aggressive tightening stance would further narrow the negative real interest rate margin.
“MPC also feels that a tightening stance would signal confidence in the effectiveness of its Monetary Policy direction to rein in inflation, improve financial system stability, and moderate exchange rate,” Emefiele stated at the media briefing.
The CBN Governor said the MPC was of the view that although the inflation rate moderated marginally in December, the economy remained confronted with the risk of high inflation with adverse consequences on the general standard of living.
“The Committee, therefore, decided to sustain the current stance of policy at this point in time to further rein in inflation.
Emefiele said “One (1) member voted to increase the MPR by 150 basis points, Four (4) members by 50 basis points, and Seven (7) members by 100 basis points.”