By Oludare Mayowa
The Central Bank of Nigeria (CBN) monetarists retained benchmark interest rate at 11.5 percent for a seventh straight time on Tuesday after their two days meeting in the country’s capital Abuja.
However, the monetarists cited persistent insecurity in large parts of the country as a major downside risk to Nigeria growth outlook.
Speaking at the briefing on the outcome of the Monetary Policy Committee (MPC) meeting, CBN Governor, Godwin Emefiele said the decision to keep rates steady was unanimously supported by members of the Committee.
“As for whether to hold its existing stance, MPC believes that the existing monetary policy stance has supported the growth recovery and should be allowed to continue for a little longer for consolidation to achieve the MPC mandate of price stability that is conducive for sustainable growth.
“The Committee also feels that a hold stance will enable it to carefully appraise the implications of the unfolding global development around policy tapering and normalization by advanced economies,” Emefiele said.
The CBN Governor further stated that, “Based on the current outlook for price development and growth, Members carefully reviewed the options confronting the Committee in the short to medium term, taking into consideration, key downside risks to growth and upside risks to inflation.
“The continued security challenge across the country remained a major source of concern for Members, noting its impact on business confidence, foreign investment inflows and overall economic activities.
“The persistence of insecurity in major food producing areas, remained a key downside risk to the recovery.”
The CBN Governor said members of the MPC also reiterated the impact of poor infrastructure on rising domestic price levels, urging the Federal Government to prioritize investment in public
utilities to improve the business environment.
These, he said include transportation networks, power supply, education and health. Following the President’s recent international call to investors to channel investments to Nigeria,
“Members were of the view that funding for such projects could be sourced through equitable
partnerships with foreign investors and Nigerians in diaspora.
Nigeria’s economic rebound, after a COVID-19-induced recession in 2020, was being driven by fiscal and monetary interventions, he said.
Nigeria recorded 4.03 percent economic growth in the third quarter, its fourth consecutive quarterly rise.
However, the security situation in Nigeria was hampering business confidence and foreign investor sentiment, Emefiele said.
Nigeria is battling an Islamist insurgency in the northeast and a spate of kidnappings for ransom in the north and northwest.
Nigeria had been grappling with low growth before the COVID-19 pandemic triggered a recession and created large financing gaps including dollar shortages and inflation.
Few expected the central bank to alter interest rates after it cut them a year ago.
Emerging markets economist at Capital Economics, said the central bank’s “case to tighten monetary policy has weakened with inflation dropping back in recent months, especially as the rebound in economic activity seems to be fading.”
On Tuesday, the World Bank called for tighter monetary policy to attract private investment, citing that the naira’s black market premium was fueling inflation, in addition to the central bank’s financing of the government’s deficit.