Highlights

Yesterday, the Monetary Policy Committee (MPC) took decisive steps to address the issue of inflation and stabilising the FX market by implementing series of measures. Three significant changes were made (i) raised MPR by 400bps, this came ahead of our 200bps expectation, (ii) adjusted the asymmetry corridor yet again. The corridor was modified from +100/-300 to +100/-700 basis points around the Monetary Policy Rate (MPR), and (iii) CRR is now 45.00% from 32.50%. Liquidity remained flat.

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) voted to increase the benchmark interest rate (MPR) by 400 basis points (bps) from 18.75% to 22.75% in its latest Committee meeting. This is the first time the Committee is meeting since the commencement of the new administration of Yemi Cardoso, after he was announced the CBN Governor in September 2023. This also represents the highest rate in at least 18 years.

Expected Impacts

• Following the interest rate hike, we expect NTB yield to rise, and it will prompt investors to restructure their portfolio towards risk free instruments to align with the prevailing yield environment at the expense of the equities market.
• A higher interest rate could also stimulate the confidence of foreign portfolio investors, as the CBN governor is set to address them on Thursday February 29^th, 2024.
• In combination with other fiscal measures to address price stability, we anticipate some moderations in the second half of the year.

Click here “February 2024 MPC Decision – The Hawk Tightens its Grip as Inflationary Targeting Kicks in” to view the full report.Thank you