CBN increases interest rate to 22.75%
The Central Bank of Nigeria (CBN) has raised the interest rate to a record of 22.75% amid rising inflation.
The apex bank made this known after the two-day Monetary Policy Committee’s (MPC) first meeting of the year held between Monday and Tuesday in Abuja.
Addressing journalists at the end of the meeting, the CBN Governor, Olayemi Cardoso, said the committee voted to adjust the asymmetric corridor around the MPR to +100 to -700 from plus 100 to -300 basis points and raised the cash reserve ratio from 32.5 percent to 45%.
According to him, “All 12 members of the committee decided to further tighten monetary policy by raising the MPR by 400 basis points to 22.75% from 18.75%. Adjust the asymmetric corridor around the MPR to +100 to -700 from plus 100 to -300 basis points.
“The committee also raised the cash reserve ratio from 32.5% to 45% while retaining the liquidity ratio at 30%.”
At its last meeting in July 2023, the MPC, headed by the former acting governor of the apex bank, Folashodun Shonubi, increased the monetary policy rate by 25 basis points to 18.75%, from 18.5% in May last year.
The capital requirement ratio was retained at 32.5% while the liquidity ratio stood at 30%.
Since then, the MPR has risen from 13% in May 2022 to 18.75% in July 2023 when the last MPC was held.
Analysts’ expectations had been divergent ahead of the first MPC meeting, but the new rate surpassed all projections by financial experts.
According to a Reuters poll released on Friday, Nigeria is expected to implement two aggressive interest rate hikes in less than two months to control inflation and strengthen the naira, following a few missed monetary policy sessions
It said the policy rate is expected to increase by 225 basis points to 21.00% despite the local currency still trading near its record low on the black market.
President Bola Tinubu had said interest rates needed to be reduced to increase investment and consumer purchasing in ways that sustain the economy at a higher level.
