Macroeconomic updateMonetary Policy AnalysisNigeriaStrategy

13 June 2022

Nigeria’s May MPC: A Bolt From the Blue

In brief

  • Inflation is the buzzword for 2022 as it is stirring in all corners of the globe and monetary chieftains are already or are fully prepared to hike interest rates in ever-increasing increments to rein it in.
  • Against this backdrop, the Central bank of Nigeria (CBN) took some pressure off the gas pedal by raising its monetary policy rate (MPR) by 150-basis points to 13%, as the withdrawal of global monetary accommodation gathers pace.
  • In our opinion, the challenge going forward remains to find the policy balance to dampen rampant inflation without shrouding the fragile growth outlook – amid clouds of geopolitical conflict in Europe.
  • Due to a policy lag, we anticipate a pause in action from the monetary policy committee (MPC) to allow for May’s decision to permeate the economy, with continued implementation of its development finance initiatives to support its economic growth mandate.
  • However, further policy action is unlikely to be as aggressive as May’s decision in magnitude, but this is on the condition that the Russo-Ukrainian conflict will not substantially escalate to derail the current economic projections.
  • But Nigeria’s financial markets – just like other emerging markets – are at the mercy of the United States (US) Federal Reserve Bank (Fed).