At the recent monetary policy committee (MPC) meeting held on Tuesday, the apex bank also retained the liquidity ratio at 30 per cent, the public sector Cash Reserve Requirement at 75.0 per cent, and the private sector cash Reserve Requirement at 15.0 per cent.
“There is no overriding link between the monetary policy and the security situation. The security situation is one of several factors one could take into consideration looking into the future,” Dr Kingsley Chiedu Moghalu, Deputy Governor of the Central Bank of Nigeria told CNBC Africa.
(READ MORE: Nigerian central bank retains interest rate at 12%)
Insecurity in Nigeria has been on the rise since 2009 from the islamist terrorist group, Boko Haram and they have increased their activities significantly this year. Nonetheless, Moghalu believes that it’s not an overriding concern of monetary policy because monetary policy responds to things like inflation.
(READ MORE: Bomb targeting imam in north Nigeria kills at least 15)
“Now let me tell you what the link is. In some parts of the north, the security situation has affected the farm land situation and that has led to some increase in food prices so that’s the link but it’s not the most important basis on which we take monetary decisions,” he said.
Nigeria’s headline inflation is currently at 8.20 per cent as food prices rose 9.8 per cent year-on-year in June, up from 9.7 per cent in May, driven by cost of bread, cereals meats and fish and diary groups.
“It could get bad but we don’t expect that it will get worse simply because the security agencies and the government are doing some very important things to contain the Boko Haram situation.”
“As you know terrorism is always a difficult thing to fight. I remember that it took the United States ten years to find and kill Osama Bin Laden and that’s big power with strong and sophisticated military,” he explained.
Out of Nigeria’s 2014 total budget of 4.962 trillion naira, 968.127 billion naira was allocated to the defence sector and the Minister of Finance, Ngozi Okonjo-Iweala, assured Nigerians that the government needs to spend expeditiously to ensure the defence sector the right support to prosecute their counter-insurgency operations.
(READ MORE: Nigeria analyses its state of security)
“In the immediate future, it’s not going to be easy to bring interest rates down based on what we have now but there is no question that our long term view and Governor, [Godwin] Emefiele has expressed that view – that in the medium to long term, we should be looking to bring interest rates down,” he added.