Nigeria’s Monetary Policy Committee (MPC) announced on Tuesday that it would retain the Monetary Policy Rate at 13 per cent.
The committee also indicated that it would retain the CRR on private and public sector deposits at 20 per cent and 75 per cent respectively. It also retained the liquidity ratio at 30 per cent.
“The committee observed that its previous decisions needed time for their effects to fully permeate the economy and therefore voted to maintain the current position,” said Central Bank of Nigeria Governor, Godwin Emefiele.
This meeting also comes several days before Africa’s biggest economy heads to the polls, following a postponement by the INEC in February over concerns regarding security measures during the elections.
(READ MORE: Nigerian elections postponed to 28 March – INEC)
“The committee expressed concern about the outlook for growth, which had moderated partly due to the effects of low oil prices, naira exchange rate depreciation and election-related concerns,” said Emefiele.
“The committee was, however, optimistic that the situation will improve once elections were successfully conducted, with the expected improvements in business confidence.”
The MPC decision on the interest rate comes after the CBN’s tactical devaluation of the naira, a move received in the country as a positive reflection of the currency.
(READ MORE: Devaluation of naira 'not a big deal' to bankers)
THE JONATHAN-BUHARI TUG OF WAR
Incumbent President Goodluck Jonathan is squaring up with Muhammadu Buhari who is likely to upset Jonathan’s second term ambitions especially due to his failure to adequately destroy the Islamic extremists, Boko Haram.
Nigeria has been going through some shockwaves in the economy with falling oil prices and devaluation of the local currency, naira.
The region’s largest oil producing economy has been knocked by more than a 50 per cent fall in the crude oil price since mid-last year.
“It’s clear that the Central Bank of Nigeria is sensitive to the elections, so we [were] unlikely to see any changes as far as the interest rates [were] concerned,” Esili Aigbe, head of West Africa research at Exotix told CNBC Africa.
Aigbe added that the central bank needed to make more corrections especially with revisiting the naira valuation.
“The naira, in my view, is due for another correction,” he said.
THE RIPPLE EFFECT
The economic headwinds that Nigeria has been facing have also seen other multinational companies in the country like South Africa’s MTN, Tiger Brands and Shoprite facing a volatile situation going into the election. Other companies with a presence and interests in Nigeria include FirstRand and Shanduka Group.
This demonstrates how negative effects on the Nigerian economy can easily affect other regional economies.
The highly volatile elections expected later this week have seen a number of rights groups warning that if not properly managed could see the country sliding back into a security crisis.