Nigeria's central bank left its monetary policy rate at 14.0 percent, as expected, noting the third consecutive quarter of economic growth in the fourth quarter of last year, continued moderation in inflation and continued stability in the naira's exchange rate.
But the Central Bank of Nigeria (CBN), which has kept its rate steady since raising it by 200 basis points in July 2016, added its monetary policy committee had taken note of the "rather slow pace of moderation in food inflation" and the potential risk of a pass-through from rising global inflation but concluded the policy rate was "tight enough to rein-in current inflationary pressures."
Today's meeting by CBN's re-constituted policy committee was the first this year as a dispute between the president and the senate had left the MPC without a quorum of six members until late last month, with the result that the scheduled policy meeting in January had been cancelled.
The decision to maintain the rate, and other policy parameters, was unanimous.
During its 2-day meeting, the MPC weighed the arguments in favor of tightening policy, which would lower inflation and have positive effects on capital flows and exchange rate stability.
However, this would also "dampen the positive outlook for growth and financial stability."
Conversely, a loosing of policy would strengthen the outlook for growth by stimulating demand through a lower cost of borrowing but also lead to higher consumer prices and generate pressure on the exchange rate and worsen the current account through higher imports.
"On the argument to hold, the Committee believes that key macroeconomic variables have continued to evolve in a positive direction in line with the current stance of macroeconomic policy and should be allowed more time to fully manifest," the CBN said.
Nigeria's economy expanded by 4.29 percent in the fourth quarter from the third quarter for annual growth of 1.92 percent, up from 1.4 percent in the third quarter and 0.72 percent in the first quarter, reversing the previous five consecutive quarters of contraction.
But the policy committee also said the continued low level of lending by banks remains a constraint to economic growth and asked the bank's management to adopt policy impetus to improve the delivery of depositors' money to credit in vulnerable and growth enhancing sectors.
Nigeria's inflation rate has been slowly declining since hitting almost 19 percent in January 2017 and fell for the 13th consecutive month to 14.33 percent in January.
Foreign exchange reserves have been rising steadily on a recovery in oil prices and hit US$46.699 billion as of March 20, up from $30.3 billion in March 2017.
