The monetary policy committee of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which benchmarks interest rates, from 24.75 percent to 26.25 percent.
The monetary policy rate (MPR) is the baseline interest rate in an economy, which banks use to set their interest rates.
Olayemi Cardoso, CBN’s governor, announced the rate adjustment at a news conference on Tuesday during the committee’s 295th meeting in Abuja.
This is the third consecutive time the apex bank will be raising the benchmark rate this year.
The apex bank has now raised interest rates 11 consecutive times since May 2022 in a bid to rein inflation.
However, between May 2022 and April 2024, inflation soared from 17.71 percent to 33.69 percent.
Speaking to journalists, Cardoso said the committee retained the asymmetric corridor at +100 basis points and -300 basis points around the MPR.
He said MPC also retained the cash reserve ratio (CRR) at 45 percent for deposit money banks (DMBs) and 14 percent for merchant banks.
According to the apex bank governor, the liquidity ratio (LR) was left unchanged at 30 percent.
Cardoso said the reason for the hike is to tighten inflation, which according to the governor “is working”.
“Following an extensive review of risks and the near-term inflation outlook, the balance of risks suggests further tightening of policy to build on the benefits accrue from previous rate hikes,” he said.
Cardoso said the key focus of MPC at the meeting was to achieve price stability by effectively using tools available to the monetary authority to rein inflation.
Citing the last inflation report, the CBN governor said the efforts by the committee to reduce inflation are having an effect.
“In terms of looking at the inflationary figure over the past year, inflation is indeed getting more and more of an issue. And, frankly, the need to moderate that by saying that any kind of inflation in my view is an issue,” he said.
“However, I think there is light at the end of the tunnel, and that is because as much as we see an increase in the inflationary figures when you go down to the specifics in terms of food, core and headline, you’ll see that it is moderating and decelerating in increment, and that’s the good news.
“Because for the first time, since October we’ve seen a relatively significant moderation in the rate of increase on the news components of inflation that I was talking about.
“I believe very strongly that the tools that the central bank is using are working.
“I’ve said several times, and I’ll say it again, there’s no magic wand. These are things that need to take their own time. They pass through and the effect of the measures in advanced countries, in developing countries, they do take time.”
He added that he is pleased and confident that the figures show that we are beginning to get some relief.
Cardoso also said he believes that in another couple of months, there would be more positive outcomes of what CBN has been doing.
