By correspondent in Abuja.
CBN Governor, Yemi Cardoso.
Photo credit: Google.
The Central Bank of Nigeria (CBN) Monetary Policy Committee has increased the interest rate by 50 basis points, bringing it to 27.25% in a surprising move for financial markets,
CBN Governor Yemi Cardoso, who also chairs the MPC, announced the decision following the committee’s meeting in Abuja.
Alongside this, the Cash Reserve Ratio (CRR) for commercial banks was raised by 500 basis points to 50%, while the ratio for merchant banks increased by 200 basis points to 16%.
The MPC adjusted the asymmetric corridor around the Monetary Policy Rate (MPR) to +500 and -100 basis points, while the liquidity ratio remains unchanged at 30%. Governor Cardoso stated that this tightening of monetary policy was a unanimous decision among MPC members.
The CBN cited rising inflation and concerns about the stability of the foreign exchange market as key reasons for the interest rate hike.
Factors such as food inflation, flooding in various regions, and rising fuel and energy costs were highlighted as pressing issues that necessitated further monetary tightening.
As CBN management marks one year under Yemi Cardoso, economic analysts note that
the recent 50 basis points hike represents a cumulative increase of 850 basis points since he took office, continuing a trend of rate hikes that began in May 2022.
While analysts anticipated a more dovish approach,following two months of declining inflation rates—July’s rate fell to 33.4% from 34.19% in June, and August’s further eased to 32.2%,concerns remain about potential inflationary pressures due to fuel scarcity and recent price hikes by the NNPCL, which raised petrol prices from N617 to N897 per litre.
This latest interest rate increase reflects the CBN’s aim to attract Foreign Portfolio Investment (FPIs) despite the recent rate cuts by the United States Federal Reserve.
Edited by Dada Ahmed.
