CEM REPORT, ECONOMY | The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has raised its benchmark interest rate by 15 basis points to 18.5 per cent while keeping all parameters constant.
The raise from 18 per cent is in continuous efforts of the MPC to contain the nation’s inflationary pressure.
CBN’s interest rate at 18.5% represents the third consecutive rise and the highest level in 22 years.
The CBN governor, Godwin Emefiele, announced the increase at the post-MPC press briefing held on Wednesday 24th, 2023.
MPC in the past 12 months has raised the nation’s interest rate from 11.5 per cent to 18.5 per cent. Yet, inflation has remained stubbornly high at 22.2 per cent as of April.
Emefiele noted that reducing the MPR was not considered and that a hold will be counterfactual to evidence on the ground.
He stated that raising rates was reducing inflation which may have risen to as high as 32% as against 22.22% if rates were not aggressively raised in April
Emefiele while addressing journalists, said the committee voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR.
He also disclosed that the MPC voted to keep the Cash Reserve Ratio (CRR) at 32.5 per cent while the Liquidity Ratio was retained at 30 per cent.
[READ ALSO] Stanbic IBTC Launches Fintech Operations
The CRR is the share of a bank’s total customer deposit that must be kept with the central bank in the form of liquid cash, while the bank’s liquidity ratio is the proportion of deposits and other assets they must maintain to be able to meet short-term obligations.
Financial experts and economists had predicted that the CBN’s Monetary Policy Committee (MPC) would raise the benchmark interest rate, known as the Monetary Policy Rate (MPR), due to increasing inflation in the country. They believed that the MPC would take into account the inflationary pressures while also considering growth dynamics.