The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN)
held its 297th meeting on the 23rd and 24th of September 2024 to review recent
economic and financial developments as well as assess risks to the outlook.
Eleven of the twelve members of the Committee were in attendance.
Decisions of the MPC
The Committee was unanimous in its decision to further tighten policy and thus
decided as follows:
- Raise the MPR by 50 basis points to 27.25 per cent from 26.75 per
cent. - Retain the asymmetric corridor around the MPR at +500/-100 basis
points. - Raise the Cash Reserve Ratio of Deposit Money Banks by 500 basis
points to 50.00 per cent from 45.00 per cent and Merchant Banks by 200
basis points to 16 per cent from 14 per cent. - Retain the Liquidity Ratio at 30.00 per cent
The Committee noted the moderation in headline inflation year-on-year in July
and August 2024.
In addition, the MPC noted the relative stability and convergence in the exchange rate across the various market segments,
resulting from the Bank’s tight monetary policy stance. This is expected to
improve confidence which will enable economic agents to plan in the medium
to long term.
The Committee was, however, unanimous in recognising that a lot more is
required to actualize the Bank’s price stability mandate. The MPC noted that
even though headline inflation trended downwards due to a moderation in food
inflation, core inflation has remained elevated, driven primarily by rising energy
prices. The uptrend poses severe concerns to Members, as it clearly indicates
the persistence of inflationary pressures. Members thus, reiterated the need to
work in close collaboration with the fiscal authority to address the current
upward pressure on energy prices.
The MPC noted the continued growth in
money supply, recognising the need to curtail excess liquidity in the system as
well as address foreign exchange demand pressures. Members were also
concerned about the growing level of fiscal deficit but acknowledged the
commitment of the fiscal authority not to resort to monetary financing through
Ways & Means.
Furthermore, members observed a strong correlation between FAAC releases and liquidity levels in the banking system as well as its impact on the exchange rate.
The Committee, therefore, agreed to increase monitoring of future releases with a view to addressing its effects on price
developments.
On food inflation, the upside risks remained flooding, hike in energy prices,
scarcity of PMS and most importantly, insecurity in farming communities.
Considering the weight of food in the CPI basket, Members recognized the
efforts of the Federal Government in addressing insecurity in farming
communities and stressed the need to remain steadfast. In addition, the MPC
applauded the ongoing effort of the Federal Government to bridge the food
supply deficit through the duty-free import window for food commodities.
The Committee also expressed optimism that the lifting of refined petroleum
products from Dangote refinery will moderate transportation costs and
significantly support the easing of food price pressures in the short to medium
term. This is also expected to moderate foreign exchange demand for
importation of refined petroleum products, with a positive spillover on external
reserve and improvement in the overall balance of payment position.
