Details of Central Bank of Nigeria Monetary Policy Committee Meeting of May 24th 2016
1. Retain Monetary Policy Rate at 12%
2. Retain Cash Reserve Ratio at 22.5%
3. Adopt “greater flexibility” in the foreign exchange market
Brief Analysis
The Inflation rate at 13.72 will remain higher than the MPR for now.
The MPR rate sets the interest rate direction for the entire economy, this 12% MPR means bank loans CANNOT be priced less than 12%.
Clearly the CBN is mindful of the latest GDP report which show a slowing Nigerian economy but is also more concerned about loosening the flow of cash (by reducing the MPR) , which would help reduce bank interest rates but increase the inflationary pressures.
With bank lending rates at 28% average, SMEs will find it extremely difficult to borrow to grow their business.
