Even though insecurity has persisted in significant regions of Nigeria, the country’s central bank maintained its benchmark interest rate unchanged at 11.5 percent for the seventh straight session on Tuesday.
Members of the Monetary Policy Committee were unanimous in their support of the decision to maintain interest rates unchanged, according to Governor Godwin Emefiele (MPC).
According to Emefiele, “MPC feels the current policy stance has aided growth recovery and should be allowed to continue for a little longer.”
After a COVID-19-induced recession in 2020, Nigeria’s economic recovery is being fueled by fiscal and monetary policies.
In the third quarter, Africa’s largest economy increased just over 4%, its fourth straight quarterly increase.
Emefiele, on the other hand, warned that the security situation in Nigeria was affecting business confidence and foreign investment attitude.
Islamic insurgents in the northeast of Nigeria are waging an insurgency and kidnapping people in the north and northwest for ransom.
“One of the biggest threats to our recovery is the persistence of insecurity. The committee urges the country’s security authorities to step up their presence in order to boost the flow of people, commodities, and services across the country “Emefiele made the comment.
Before the COVID-19 epidemic precipitated a recession and large funding gaps, including dollar shortages and inflation, Nigeria had been struggling with low growth.
A year after cutting interest rates, few anticipated the central bank to change them again.
“The rationale for tightening monetary policy has eroded with inflation slipping back in recent months, especially as the bounce in economic activity looks to be receding,” said Virág Fórizs, an emerging markets economist at Capital Economics.
According to the World Bank, the naira’s black market premium is generating inflation in addition to the central bank’s financing of the government’s deficit, which is why stricter monetary policy is needed to bring in private investment.