The Central Bank of Nigeria, (CBN), has again raised the Monetary Policy Rate (MPR), which measures interest rates by 50 basis points, from 26.25% to 26.75% amid soaring inflation and skyrocketing food prices.
CBN Governor, Olayemi Cardoso, announced this after the apex banks 296th Monetary Policy Committee (MPC) meeting in Abuja on Tuesday.
The MPC also pegged the Cash Reserve Ratio (CRR) for Deposit Money Banks at 45%, while that of merchant banks was put at 14%. The liquidity ratio was pegged at 30%.
The apex bank also adjusted the asymmetric corridor around the MPR, from +100 to 300 basis points (around the MPR) to +500 and 100 basis points (around the MPR).
Speaking on the reason for the 50-basis point hike, Chairman of the MPC, Yemi Cardoso, noted recent events in the economy, such as inflation and the need to stabilise the foreign exchange market, as rationale for the increase.
He further referenced recent policies of the Federal Government to import specific staple foods such as rice, maize, and wheat to help stem the rising food inflation, but warned that the timeline should be followed in order not to stifle the gains made in local food production.
Additionally, Cardoso praised the convergence between the official exchange rate and that of the parallel market as part of efforts to reduce arbitrage in that sector.
The 50 basis points increase to the interest rate would be the fourth consecutive increase in interest rates by the CBN in 2024, and continues from similar MPR hikes in 2023.
While the reason for the hike in interest rates by the CBN seems genuine, members of the public, especially the business community, seem to be negatively affected as the cost of accessing capital has skyrocketed and they have voiced their concerns. Popular among them is Africas richest man, Aliko Dangote, who stated that no economic growth will occur, nor would jobs be created, if interest rates from banks stay at 30%.
Additionally, the National Association of Chambers of Commerce, Industries, Mines, and Agriculture, (NACCIMA), has noted that the monetary policy tightening by the CBN contributes to inflation rather than reduces it.
