Against the backdrop of inflationary pressures, the room for the MPC to ease monetary policy further was highly constrained. The inflation rate rose for the tenth consecutive month to 12.6% in June 2020 from 11.2% in September 2019. The MPC reiterated the fact that reducing the MPR would not lead to movements in other money market rates. The large disparity between MPR at 12.5% and other rates including T-bill rate (1yr) at 3%, OMO rate at 6%, bond yield (5yrs) at 6% and maximum lending rate at over 20% casts doubt about the potency of the monetary policy rate as an anchor/benchmark interest rate.
The task to revive the Nigerian economy will thus require coordination between monetary and fiscal authorities. This has prompted the call for a complementary fiscal policy to salvage an economy already ravaged by twin crises of the COVID-19 pandemic and crude oil price decline. Consequently, the Nigerian government recently revised its budgetary estimates upwards to N10.8 trillion ($28.6 billion)1 from N10.6 trillion.
Efforts to strengthen implementation, transparency, and accountability must, therefore, be intensified to ensure that individuals and businesses get the necessary support going forward.
Download document to learn more.