CBN Raises Interest Rate To 18.75%

The Central Bank of Nigeria (CBN) has raised the Monetary Policy Rate (MPR), which measures interest rate, from 18.5% percent to 18.75%.

The acting CBN Governor,  Folashodun Shonubi, made this known to Journalists after the bank’s Monetary Policy Committee (MPC) meeting in Abuja.

This is the first decision of the monetary committee since President Bola Ahmed Tinubu’s assumption of office on May 29, 2023.

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He said that the Committee took decision to sustain efforts at anchoring inflation expectation, narrow the negative real interest rate gap, and improve investor confidence.

“Following the outlook for the domestic economy, members were of the view that the Committee was confronted with only two policy options, to hold or marginally hike the policy rate to offset the moderate increase in headline inflation. Considering the option to a hold, the Committee reviewed the impact of the continued rise in inflation on various macroeconomic variables, noting the potential dampening effect on output growth. Members agreed unanimously that the previouS series of rate hikes had indeed greatly moderated the pace of price development and was gradually but steadily yielding the expected outcome. The option to continue to hike the policy rate, albeit moderately, also presents a strong alternative. This is premised on the expected liquidiiy injections into the economy, from the recent policy developments and the likely impact on inflation.

The Committee remained cautious in arriving at a policy decision as Members noted the need to continue to support investment which will ultimately lead to the recovery of output growth. The balance of these arguments thus, leaned in favour of a moderate rate hike, to sustain efforts at anchoring inflation expectation, narrow the negative real interest rate gap, and improve investor confidence.”

According to him, the Monetary Policy Committee decided to raise the MPR by 25 basis points, from 18.50 to 18.75 per cent; adjust the asymmetric corridor to +100/-300 basis points around the MPR from the previous corridor of +100/-700 basis points around the MPR; retain the CRR at 32.5 per cent; and Retain the Liquidity Ratio at 30 per cent.

It would be recalled that last week, Nigeria’s inflation rose to 22.79% in June from the 22.41% recorded in May 2023

This was amid the increase in food prices and the rising cost of transportation due to the removal of fuel subsidy

According to the latest Consumer Price Index (CPI) report released by the National Bureau of Statistic (NBS) the CPI measures the rate of change in prices of goods and services.