The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), on Tuesday increased the Monetary Policy Rate (MPR) by 400 basis points to 22.75 per cent from 18.75 per cent.
The CBN Governor, Yemi Cardoso, who chairs the MPC , announced the committee’s decisions on Tuesday after the meeting.
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Cardoso said that the asymmetric corridor around the MPR was adjusted to +100 – 700 basis points from + 100 -300 basis points.
“The Cash Reserve Ratio (CRR) was increased from 32.5 per cent to 45 per cent, while the Liquidity Ratio was retained at 30 per cent.
“The committee decisions is centred around the current inflationary and exchange rate pressures, projected inflation, and rising inflation expectations.
“Members are concerned about the persistent rise in the level of inflation and emphasised the committee’s commitment to reverse the trend as the balance of risk leans towards rising inflation.
” The committee, however, acknowledged the tradeoff between the pursuit of output growth and taming inflation but was convinced that an enduring output expansion is possible only in environment of low and stable inflation,” he said.
At the 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 per cent, from 18.5 per cent in May last year.
The capital requirement ratio was retained at 32.5 per cent while the liquidity ratio stood at 30 per cent.
Since then, the MPR has risen from 13 per cent in May 2022 to 18.75 per cent 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 per cent despite the local currency still trading near its record low on the black market.
President Bola Ahmed 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.
