CBN Predicts Lower Food Prices in 2019 Harvest Season and Retains 13.5% Interest Rate


Nigeria's Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has affirmed its stance of holding the monetary policy rate at 13.5%.
While briefing journalists at the end of the committee’s two-day meeting which was held between 23rd and 34th July, 2019, Godwin Emefiele, Governor of the apex bank disclosed that the price of food items is expected to reduce with the onset of the harvest season although, there is a need to urgently attend to the country’s security challenges.


Reading a communique of the two-day meeting, Emefiele informed that tightening monetary policy rate is not an option.

The asymmetric corridor was retained at +200/-500 basis points around the MPR, cash reserve ratio (CRR) at 22.5% and liquidity ratio at 30%.

In his words “Given the happenings in the external sector and the fact that inflation is moderating, tightening of monetary policy should not be an option at this time as the restriction of the capacity of deposit money banks to create money will curtail their credit creation capability,” Emefiele said.

Also, according to him, loosening will increase the money supply, stimulate aggregate demand and strengthen domestic production, the economy could be awash with excess liquidity especially if loosening drives growth in consumer credit without commensurate adjustment in aggregate output.

More so, the committee members supported holding the rates on the back of the CBN’s new policy that banks must have minimum lending to deposit ratio of 60%.

Since the interest rates are currently trending downwards, it is safer to await the impact of this policy action on the economy before the review of the position of monetary policy.

Most importantly, the committee projected that the economy would grow at 2.27% by the end of 2019 while inflation is projected to remain at 11.37%.