Again, CBN raises interest rate

The Central Bank of Nigeria on Tuesday announced another interest rate hike to address Nigeria’s inflation, which hit 34.19 per cent in June.

CBN Governor Olayemi Cardoso disclosed this while addressing journalists at the end of a two-day Monetary Policy Committee (MPC) meeting held in Abuja.

The Monetary Policy Rate was increased by 50 basis points (bps) to 27.65 per cent from 26.25 per cent, the fourth rate increase this year after hikes of 150 basis points in May, 200 basis points in March and 400 basis points in February.

The benchmark interest rate, also called MPR (monetary policy rate) can be considered the interest rate the CBN uses to lend to banks who then lend to customers at different rates.

The central bank also adjusted the asymmetric corridor around the MPR from +100 to -300 basis points to +500 to -100 basis points.

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Mr Cardoso said the committee voted to retain the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks and adjust the CRR of merchant banks at 14 per cent.

The committee also voted to retain the liquidity ratio at 30 per cent.



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“The committee was mindful of the effect of rising prices on households and businesses and expressed its resolve to take necessary measures to bring inflation under control.

“It re emphasise its commitment to the banks price stability mandate and remained optimistic that despite the June 2024 uptick in headline inflation, prices are expected to moderate in the near term,” he said.

The bank chief said this is hinged on monetary policy gaining further traction in addition to recent measures by the fiscal authority to address food inflation.

According to him, the committee in its consideration noted the persistence of food inflation which continues to undermine price stability.

He also blamed the prevailing insecurity in food producing areas and high cost of transportation of farm produce for the upward pressure.

Mr Cardoso recently emphasised the need to maintain high rates to mitigate the risk of hyperinflation and its impacts.

READ ALSO: CBN sells dollars to BDCs at N1,450/$1

Regarding the duration of rate hikes, he said: “That will be as long as we can control and reverse galloping inflation. Once we achieve that, we will maintain the rates. We are all aware that in the Western world, they implemented rate hikes to control inflation and maintained them for a very long time. It is only recently that they have stopped rate hikes, but they have not yet started reducing the rates.

“It is important that we tighten and hold on for a little while and in no distant future, we will be able to slow down on the rate hikes.”

Experts have warned against further hike of the rate, arguing it could have ripple effects on businesses.



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