In tandem with our expectations as expressed in our Pre-MPC report, the Monetary Policy Committee (MPC) decided at its meeting held on September 18-19, 2014 to keep all the key policy rates at the levels they were previously.
However, this was not the general consensus of the committee, as the committee was split between retaining the current stance of monetary policy and further tightening- an indication of a surprisingly more hawkish reasoning.
The Committee was unanimous on the concerns about high banking system liquidity and its potential effects on the rising inflationary trend and the exchange rate. The policy challenges, the Committee noted, would include sustaining the stability of the Naira exchange rate, managing the vulnerability to capital flow reversal in the light of an end to the US Fed quantitative easing (QE), building fiscal buffers to insure against global shocks, managing inflation and exchange rate expectations and safeguarding the financial system stability in a period of liquidity buildup in election related spending.
The Committee further reaffirmed their commitment to sustain efforts at ensuring price stability.It would be recalled that The Street Journal had reported on Friday that Nigeria’s central bank was likely to leave monetary policy unchanged when it met last weekend, but would be more accommodating
next year if the naira can hold firm ahead of an expected U.S. interest rate rise, economy analysts have predicted
However, all 23 economists surveyed this week expect the central bank of Africa’s biggest economy to keep its main interest rate at 12 percent at a policy meeting on Friday, despite inflation quickening for the sixth consecutive month in August.
Nigeria’s inflation rate is now just under the 9 percent upper end of the central bank’s comfort range, with former central bank governor Lamido Sanusi credited with keeping it in check.
New central bank governor Godwin Emefiele said just after taking office in June that he would seek to gradually lower interest rates – which have held at 12 percent for nearly three years – indicating a new dovish stance.