The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) raised the Monetary Policy Rate (MPR), also known as the benchmark interest rate, by 50 basis points (bps) to 18% on Tuesday, citing rising inflationary pressures.
Previously, the rate stood at 17.5%.
According to the National Bureau of Statistics, Nigeria’s inflation rate increased to 21.91 percent in February 2023 from 21.82 percent in January, primarily due to rising energy, food, and naira prices (NBS).
According to NBS statistics, Nigeria’s annual GDP growth rate has slowed to 3.10 percent in 2022, down from 3.40 percent in 2021.
The CBN Governor, Godwin Emefiele, announced the increase in MPR on Tuesday while reading the communiqué from the second MPC meeting.
He also stated that the committee set the liquidity ratio at 30%.
According to the apex bank governor, tightening the rate will reduce inflation, which is currently at 21.91 percent.
At the end of the two-day meeting in Abuja, Emefiele told journalists that the committee voted to keep the asymmetric corridor at +100 and -500 basis points around the MPR.
He also stated that the MPC voted to maintain the Cash Reserve Ratio (CRR) at 32.5 percent and the Liquidity Ratio at 30%.
The CRR is the proportion of a bank’s total customer deposits that must be kept with the central bank in the form of liquid cash, whereas the liquidity ratio is the proportion of deposits and other assets that must be kept to meet short-term obligations.
In January, the MPC increased its benchmark lending rate from 16.5% to 17.5% as part of a sustained effort to control inflation and relieve pressure on the naira.
Emefiele explained that the bank supports the Supreme Court’s decision because the currency in circulation (redesigned naira) is now one trillion naira.
He stated that the central bank will continue to inject new currency into the system, but with caution.
