The committee remains committed to price stability. As such, it decided to tighten as it noted weakening macroeconomic challenges. Inflation was obviously a deciding factor here. We expected that they would wait for at least the next set of inflation data before making a decisive move. GDP growth is likely to suffer. However, once inflation stabilises the MPC may attempt to try and spur growth.
Yields on government bonds are expected to trend up.


Decision

8 out of 10 members were present

The committee decided to :

Increase MPR from 11% to 12% as well as adjust the asymmetric corridor from +2% / -7% to +2.5%/ -5%

Increase CRR from 20% to 22.5%

Retain liquidity ratio at 30%



The committee also expressed concerns over the delayed passage of the budget. It noted that its speedy passage would halt the period of uncertainty and boost business confidence.

The committee blamed the uncertainty on fiscal policy, low electricity supply, slowdown in credit to the private sector and insurgency in the north east amongst others for the slowdown in Q4 GDP.

With regards to imports and fx scarcity, Emefiele appealed that Nigerians should look inwards (particularly with items that can be sourced locally). This will assist with diversification .

Based on the personal statements by committee members from the last meeting (in January) only one member, Dr. Salami, proposed that the mid- point of the exchange rate band be moved from N197/US$ to N220/US$ and the band be widened to +5% /-5% .Other members voted to retain all measures, stating that this would allow previous steps taken to work their way through.


We see a modest devaluation during the year (to N230 per US dollar).

All I see on those adjustments is a gradual acceptance of the economic situation.

With all these I hope my bank won't raise the interest rate on my facility beyond the present 29%