Macroeconomic Report & Economic Updates

Nigeria Economic Update (Issue 21)

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) met on the 23rd and 24th of May 2022 to deliberate on local and global economic development. At the end of the meeting, the MPC increased the Monetary Policy Rate (MPR) by 150 basis points to 13 percent from 11.5 percent1. However, the MPC retained the Cash Reserve Ratio (CRR) at 27.5 percent and the Liquidity Ratio at 30 percent. The committee noted that even though the economy has been experiencing growth for six consecutive quarters, inflationary pressures persist. As a result, the MPC thinks that increasing the MPR will reduce the inflation levels in the economy. While the increase in MPR is likely to signal to investors the Bank’s readiness to reduce the inflation rate, there is a need for complementary fiscal policy to ensure that the economy is not severally affected. An increase in MPR is likely to increase the cost of borrowing, which might slow down business activities. Apart from the high cost of borrowing, insecurity, poor transport system, and erratic power supply contribute to the high cost of doing business in Nigeria. A steady power supply, an efficient transport system, and improved security achieved through complementary fiscal policies would reduce the cost of business and contribute to achieving low inflation.

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