Godwin Emefiele, CBN Governor
CBN raises interest rate to 14% to tame inflation
The Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which measures interest rate, from 13 percent to 14 percent.
This is specifically to deal with rising inflation in the country as only in June, Nigeria’s inflation rate reached a five-year high at 18.60 percent.
Indeed, the monetary policy rate (MPR) is the baseline interest rate in an economy, every other interest rate used within an economy is built on it.
The Governor of the Central Bank of Nigeria, CBN, Godwin Emefiele, addressed journalists on Tuesday after the meeting of the Monetary Policy Committee, MPC, at the CBN headquarters in Abuja.
Emefiele said the hike in interest rate would help tame rising inflation.
The development is the second consecutive time the apex bank will be raising the benchmark rate this year.
At its last meeting in May, the committee also raised MPR from 11.5 percent to 13 per cent over the surge in fuel and food costs.
Emefiele said the committee members voted to hike the rate by 100 basis points and retained the asymmetric corridor at +100 and -700 basis points around the MPR and liquidity ratio at 30 percent.
The new interest rate comes barely two months after the apex bank raised the interest rate to 13 per cent.
Emefiele said: “The committee resolved that the most rational policy option would be to further strengthen its tightening stance in order to effectively curtail the unabated rising trend of inflation.
“Members were conscious of the fact that output growth remained fragile.
“However, not curtailing inflation now could erode the monetary gains achieved in improving consumer purchasing power and thus worsen the poverty level for the vulnerable populace.”
The monetary policy rate (MPR) is the main interest rate in a country or economy on which all other interest rates in that economy are based.
While the apex bank increased the MPR rate, it, however, retained other parameters.
The asymmetric corridor remains +100 and -700 basis points around the MPR and the well as Cash Reserved Ratio at 27 per cent.
Emefiele added: “Committee thus vote unanimously to raise the Monetary Policy Rate.
“One member voted to increase the MPR by 150 basis points, six members by 100 basis points, one member by 75 basis points and three members by 50 basis points.
“Consequently, Committee resolved to increase the MPR by 100 basis points from 13 percent to 14 percent. In summary, MPC voted as follows:
“Increase MPR to 14% from 13, retain the Asymmetric Corridor at +100 and -700 basis points around the MPR, retain the CRR at 27.5 per cent and retain liquidity ratio at 30 per cent.”
Tuesday’s rate hike marks the second time the MPC will raise the interest rate in two months.
It was increased the rate from 11.5 per cent to 13 percent on May 24, 2022.