The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) held its firstmeetingfor the year 2021on January 25-26.At the meeting, thecommittee members unanimously voted to keepall monetary policy parameters unchanged as follows:Monetary Policy Rate at 11.5%;Cash Reserve Ratio (CRR) at 27.5%;Liquidity ratio at 30% and an asymmetric corridor of +100/-700 basis points around the MPR.The decision represents thesecond consecutive sessionthat the committeememberswould maintain status quo on all monetary parameters. The MPC members met at a time when the Nigerian economyis battling with therecurrence of stagflation -which is a combination of rising inflation and output contraction –as was witnessed during the 2016 recession.
Meanwhile, having weighed the benefits associated with the retention of monetary policy parameters against the costs associated with easing or tightening monetary policy, the MPC adjudged the current stance as appropriate consideringthe multiplicity of fiscal and monetary stimulus packages that are being deployed toreverse the recession. The MPC also acknowledged the potency of the 65% Loan-to-Deposit Ratio(LDR)policy as reflected in a quickergrowth in aggregate domestic credit at13.4% in December 2020 from 9.5%in the previous month. The policy has,however,not undermined the quality of banking assets with the relative stability of thenon-performing loan ratio within the range of 5%-6.7% since the LDR was adjusted to 65% from 60% in December 2019.