Home Finance & Economy Why MPC will retain benchmark lending rate, others

Why MPC will retain benchmark lending rate, others

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Temitope Adeoye

Ahead of the 271st Monetary Policy Committee (MPC) of the Central Bank of Nigeria, there are strong indications that the surging inflation rate in the country may force members to maintain the status quo on Monetary Policy rates.

The National Bureau of Statistics (NBS), Consumer prices in Nigeria was on the rise for the fourth straight month in December 2019, reaching its the highest level since April 2018 at 11.98 per cent as food prices continued to rise.

This recent development has been, however, attributed to the on-going border closure by the federal government of Nigeria.

In fact, there are strong indications that taking cognizance of inflationary pressures making its way at the early stages of 2020 and moving further away from the CBN 9 per cent upper target band, the naira will continue to be volatile.

Although Godwin Emefiele, the central bank governor, said in November 2019 said, “the impact of the border closures on inflation is temporary”, this may be questioned if inflation continues to escalate in 2020.

Rising inflation Image

But with the recent twist of rising inflationary pressures, industry stakeholders believed that the MPC may be forced to maintain the status quo on at the close of its bi-monthly meeting, which comes up next week.

However, many will have their focus on the Loan to Deposit Ratio (LDR) for banks which has been set to 65 per cent.

Looking at the forecast for LDR, it has been speculated that the apex bank may increase the loan to deposit rate to 70 per cent in an effort to boost economic growth through investments in Nigeria’s real sector, but the apex bank had recently debunked the move.

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