CBN raises interest rate to 27.5%
Following Tuesday’s meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), which is 298th, in Abuja, the apex bank raised the monetary policy rate (MPR), which benchmarks interest rates in the country to 27.50 percent — from 27.25 percent.
Governor of the CBN, Mr. Olayemi Cardoso, who announced this decision at a press conference after the meeting, said the committee increased the MPR by 25 basis points.
Cardoso said the committee retained the asymmetric corridor at +500 and -100 basis points around the MPR.
The CBN governor said the MPC also retained the cash reserve ratio (CRR) at 50 percent, as well as the liquidity rate at 30 percent.
The economist said the MPR was raised to address price developments.
According to the CBN boss, the MPC stressed the need to focus on the optimum policy choice to address the uptrend in price development, stabilise the exchange rate, and anchor inflation expectations appropriately.
“The committee was particularly concerned that all three measures also inched up on a month-on-month basis, suggesting the persistence of price pressures with attendant adverse impact on income and welfare of citizens,” Cardoso said.
“Members, therefore, agreed unanimously to remain focused in addressing price developments.
“While food prices remain a key contributor to the uptick, members commended the efforts of the federal government for the improved security, especially in the northeast of the country, which would likely improve food production.
“The committee also noted the role of rising energy prices on the general price level due to its impact on factors of production.
“The recent increase in the price of premium motor spirit, PMS, has also impacted the cost of production and distribution of food items and manufactured goods.”
However, Cardozo said the committee was optimistic that the full deregulation of the downstream subsector of the petroleum industry would eliminate scarcity and stabilise price levels in the short to medium term.
“Members thus reiterated the need to strongly forge ahead with the deepening collaboration between the monetary and fiscal authorities to ensure the achievement of our synchronized objectives of price stability and sustainable growth.”
The CBN governor also said the committee was happy about the improvement in the external sector, reflected by the increase in the current account surplus, enhanced remittance, and capital inflows.
This, he added, has impacted the external reserves positively.
Cardoso also said the committee agreed that the key policy measures by both the monetary and fiscal authorities are “yielding the desired outcomes”.
