The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) has voted to raise the country’s benchmark interest rate, known as the Monetary Policy Rate (MPR), to 27.25%.
This move, which was revealed during a press conference at the CBN headquarters in Abuja on Tuesday, marks an increase of 50 basis points from the previous rate of 26.75% set in July 2024.
The MPR serves as the foundation upon which other interest rates in the Nigerian economy are based. During the fifth MPC meeting of the year, CBN Governor Olayemi Cardoso explained that the decision to tighten monetary policy was unanimous among committee members.
Under the current leadership of the CBN, which took office a year ago, the interest rate has now risen by a total of 8.5%. Cardoso commented, “The committee was unanimous in its decision to further tighten policy and thus decided as follows, one: raise the MPR to 27.25 per cent.”
In addition to the interest rate hike, the MPC maintained the asymmetric corridor around the MPR at +500 to -100 basis points.
The Cash Reserve Ratio (CRR), which refers to the amount of funds commercial banks must hold as reserves, was also raised significantly.
Deposit money banks saw an increase of 500 basis points, pushing the CRR to 50%, while merchant banks experienced a 200-basis-point rise, bringing their CRR to 16%. The liquidity ratio remained unchanged at 30%.
Governor Cardoso reiterated, “The MPC decided to retain the asymmetric corridor around the MPR at plus 500 to minus 100 basis points. It also raised the Cash Reserve Ratio of deposit Money banks by 500 basis points to 50 per cent from 45 per cent and merchant banks by 200 basis points to 16 per cent from 14 per cent and retain the liquidity ratio at 30 per cent.”
Despite recent months of declining inflation, many financial experts had expected the CBN to hold or possibly reduce interest rates.
However, the MPC’s decision to further tighten monetary policy suggests a continued focus on maintaining economic stability in the face of global and domestic pressures.
