. Retains other parameters
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has voted to raise the monetary policy rate (MPR) at 13% to tame rising inflation, a movement of about 1,500 basis points, while keeping other parameters constant.
This is the first time the apex bank has increased its MPR rate through which it lends to banks since September 2020 from 12.5%, a decision the Committee believes will help mop up liquidity ahead of the 2023 general elections.
Addressing journalists today after the MPC’s 285th meeting at the CBN headquarters in Abuja, Governor Godwin Emefiele, defended that raising the MPR also became imperative given Nigeria’s rising inflation, which peaked at 16.82% in April.
This, he said, complicates the CBN’s effort to manage rising prices, noting that although Nigeria’s economy is on the growth trajectory, it still remains fragile.
Besides, he noted that global inflationary pressure has influenced policy tightening as the International Monetary Fund (IMF) also called on central banks for higher interest rates, adding that the Russia-Ukraine crisis had led to an upsurge in global inflationary pressure.
The global inflationary pressure has influenced policy tightening as the International Monetary Fund also called on central banks for higher interest rates, adding that the Russia-Ukraine crisis had led to an upsurge in global inflationary pressure.
As a result, food and energy prices have risen to over 40 years high and coupled with logistics issues for agricultural products and epileptic power supply have worsened Nigeria’s inflationary pressure.
Explaining the rationale for its decisions, Emefiele said the MPC took a cautious shift to a policy hike to sustain Nigeria’s economic recovery, noting that tightening will help curb inflationary pressure before it reaches a galloping trend.
He added that tightening will also provide incentive for capital inflow and restore investors’ confidence.
On the other hand, Emefiele argued that reducing the MPR would also put pressure on the country’s exchange rate and lead to further depreciation of the Naira.
Aside from raising the MPR rate, he said the Committee also voted to retain the asymmetric corridor at +100 and -700 basis points around the MPR and liquidity ratio at 30%.
Also, the cash reserve ratio (CRR) was retained at 27.5%, even as he warned lenders to be more prudent.
