CBN raises interest rate from 24.75% to 26. 25% to tame inflation

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The Central Bank of Nigeria (CBN) has ended its Monetary Policy Committee, MPC, on Tuesday, raising the interest rate by 150 basis points from 24.75 per cent to 26. 25 per cent.

The MPC, after the two-day meeting, agreed to increase the Monetary Policy Rate (MPR) for the third consecutive time in order to tame spiralling inflation, which is put at 33.69% in April 2024.

According to a communique signed by the CBN Governor, Yemi Cardoso, who is also the MPC chairman on Tuesday, “The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held its 295th meeting on the 20th and 21st of May 2024 to review recent economic and financial developments and assess risks to the outlook.

“Decisions of the MPC. The committee’s decisions are as follows: 1. Raise the MPR by 150 basis points to 26. 25 per cent from 24.75 per cent.”

The CBN governor Cardoso informed that the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBS) was retained at 45 per cent. The MPC also put the Asymmetric Corridor around the MPR at +100 and –300 basis points. It retained the liquidity ratio at 30 per cent.

Cardoso, who agreed to the rising inflation levels in the country, said the key focus of the MPC meeting was to achieve price stability by using tools available to rein in inflation.

He said inflation pressure is being driven largely by food inflation, citing rising costs of transportation, infrastructure challenges, insecurity, and exchange rate issues as some of the factors affecting it.

Accordingly, the MPC stated that it will continue to monitor developments in the global and domestic economies to guide policy and ensure that inflation expectations are adequately anchored.

All 12 members of the MPC attended the meeting, with next meeting of the Committee holding between July 22 to 23rd, 2024.