The Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), interest rate, from 16.5 per cent to 17.5 per cent to rein in inflation.
In December, Nigeria’s inflation rate fell slightly from 21.47 per cent to 21.34 per cent.
The monetary policy rate (MPR) is the baseline interest rate in an economy, every other interest rate used within an economy is built on it.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria, CBN, unanimously voted to increase the benchmark interest rate by 100 basis points to 17.5 per cent.
Godwin Emefiele, governor of the CBN, announced the development in Abuja while reading the communiqué of the end of the two-day MPC meeting, the first of the year.
This is the fifth time the CBN would increase the interest rate despite calls by stakeholders against the increment.
The CBN said previous increases were beginning to yield results with the slight drop in the inflation rate recorded in December 2022.
However, the CBN stressed that there was a need to keep tightening its fiscal policy.
Emefiele said the MPC was of the view that, although the inflation rate moderated marginally in December, the economy remains confronted with the risk of high inflation with adverse consequences on the general standard of living.
He explained that loosening the rate would negate the objective of damping pent-up aggregate demand which fuelled inflation.
“One member voted to increase the MPR by 150 basis points, four members by 50 basis points and seven members by 100 basis points. In summary, MPC voted to raise MPR to 17.5 per cent,” the CBN governor said.
Emefiele said the committee also voted to retain the asymmetric corridor at +100 and -700 basis points around the MPR.
In addition, the committee also voted to retain the cash reserve ratio (CRR) at 32.5 per cent and keep the liquidity ratio at 30 per cent.
JAN 31 DEADLINE STILL STANDS
Speaking on the January 31 deadline for the phasing out of old naira notes, Emefiele insisted that the date remains sacrosanct.
He also said the time given for the deposit of the old naira notes was enough for Nigerians to go to commercial banks and get new notes.
“I don’t have good news for those who feel we should shift the deadline; my apologies,” he said.
“The reason is that 90 days should be enough for those who have the old currency to deposit it in the banks.”
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