CBN Increases Interest Rate To 26.75% Despite High Inflation

The Central Bank of Nigeria (CBN) has announced an increase in the Monetary Policy Rate (MPR) by 50 basis points, raising it from 26.25% to 26.75%.

This decision came after the CBN’s 296th Monetary Policy Committee (MPC) meeting in Abuja, chaired by the CBN Governor Olayemi Cardoso.

Cardoso, addressing the media following the meeting, emphasised the MPC’s awareness of the severe impact of rising prices on both households and businesses.

He reiterated the committee’s commitment to implementing necessary measures to curb inflationary pressures and ensure economic stability.

In addition to the MPR adjustment, the MPC also widened the asymmetric corridor around the MPR, expanding it from +100 to -300 basis points to +500 to -100 basis points.

He pointed out that the move is intended to provide the CBN with more flexibility in managing monetary policy amid the current economic challenges.

Despite a recent uptick in inflation figures for June 2024,  Cardoso expressed optimism that inflationary pressures would ease in the near term.

He cited the expected effectiveness of the strengthened monetary policy measures and anticipated complementary actions by fiscal authorities to address food inflation.

The MPC’s decision also maintained the Cash Reserve Ratio (CRR) for deposit money banks at 45% and merchant banks at 14%, alongside retaining the Liquidity Ratio at 30%.

Recall that Cardoso had cautioned that the CBN will keep interest rates high for longer if inflation does not ease up.

However, there has been criticism around this policy, with one of the vocal persons, Aliko Dangote, who had criticised the CBN’s interest rate, warning that such a policy would stifle business growth and job creation.

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