The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), yesterday, increased the Monetary Policy Rate (MPR), which measures interest rate from 18.5 to 18.75%.
Acting CBN Governor, Folashodun Shonubi, briefing journalists after MPC meeting at the CBN headquarters in Abuja, said the Committee voted to hike the rate by 25 basis points to 18.75%, adjust the asymmetric corridor to +100 and -300 basis points around the MPR, retain the cash reserve ratio (CRR) at 32.5% and liquidity ratio at 30%.
This is the first MPC meeting and decision taken since the advent of the new administration on May 29, and subsequent suspension of Godwin Emefiele as the apex bank’s governor in June.
Shonubi explained that the MPC decisions were based on considerations arising from global economic developments and impact on the domestic economy.
In the communique issued at the end of the two-day meeting, Shonubi said: “The Committee’s considerations focused on the persistent rise in inflation and its potential adverse effect on output growth and household income.
“The continued uptick in inflation (month on month), driven by increase in both the food and core components of the CPI, in the view of members, remained a key challenge.”
Key developments that would likely sustain upward pressure on domestic prices, in the short to medium term, are the recent deregulation of petrol price and the transition to a unified and market-determined exchange rate.
Last week, the National Bureau of Statistics (NBS), reported an increase in Nigeria’s headline inflation rate from 22.41% in May to 22.79% in June.
On a year-on-year basis, the headline inflation rate in June was 4.19% higher than the18.6% rate recorded in June 2022.
On the continued uptick in inflationary pressure, the Committee said the rate “was driven by the moderate increases to both food and core components.
“Legacy headwinds, including security challenges in major food-producing areas; high cost of transportation driven by the rising cost of energy; and inadequacies in public infrastructure, continue to drive the rise in food and core inflation.”
The Committee added that “Key developments that would likely sustain upward pressure on domestic prices, in the short to medium term, are the recent deregulation of petrol price and the transition to a unified and market-determined exchange rate.
“The unfolding dynamics in the policy environment and the resultant pass-through to domestic prices would thus require greater collaboration between the Bank and the fiscal authority.”
The members also expressed concerns that the recent policy decisions around subsidy removal, exchange rate liberalization and disbursement of palliatives, would have pass-through effects to inflation.
“Members therefore called for decisive measures, by the Bank, to address the likely liquidity surfeit from these developments, including using appropriate monetary policy instruments.”
