The monetary policy rate (MPR), which measures interest rates, was increased from 17.5 percent to 18 percent by the Central Bank of Nigeria’s (CBN) policy-setting committee.
Due to the ongoing cash shortage, Nigeria’s inflation rate increased last week to 21.9%.
Every other interest rate used in an economy is based on the monetary policy rate (MPR), which is the economy’s fundamental interest rate.
Following the meeting of the committee at the CBN headquarters in Abuja on Tuesday, the governor of the top bank, Godwin Emefiele, informed the media of the development.
This development marks the second time in a row that the apex bank will increase the benchmark rate this year.
Emefiele reported that the committee members decided to raise the rate by 50 basis points to 18%, keep the asymmetrical corridor at 100 and -700 basis points around the MPR, keep the cash reserve ratio (CRR) at 32.5%, and keep the liquidity ratio at 30%.
Despite the fact that inflation has continued to rise, he claimed that the previous tightening measure has continued to slow the rate of price growth.
Concerning worries that the hawkish stance would have an adverse impact on the banking sector, the CBN governor stated that the apex bank’s strict micro- and macro-prudential guidelines have ensured the stability and sustenance of the banking system.
One of the reasons for the monetary policy committee’s tightening stance, according to him, is the planned removal of the gasoline subsidy.
Subsidy removal will probably happen before this administration ends in May, whether we like it or not, Emefiele said.
“We will keep tightening, but more moderately, to close the gap in negative real rates. “.