By Tochukwu Bliss, Abuja
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), today, raised the Monetary Policy Rate (MPR), yet again to 26.75% (50 basis points increase) from the current 26.25%.
The hike in the MPR, the benchmark interest rate the CBN uses to lend to banks, who in turn lend to customers at different rates, comes despite warnings by experts on the negative consequences of further hikes on the overall economy.
With Nigeria’s inflation soaring to all-time high of 34.19 %, and in particular food inflation at 40.87% as of June 2024, the CBN has had to maintain a strong stance to stem the tide.
Reading the communique issued at the end of the MPC’s 296th meeting in Abuja, CBN Governor, Olayemi Cardoso,
Also said the Committee adjusted the asymmetric corridor around the MPR from +100 to -300 to +500 to -100 basis points.
The Committee was mindful of the effect of rising prices on households and businesses and expressed its resolve to take necessary measures to bring inflation under control.
Members however favoured to retain the Cash Reserve Ratio (CRR) of deposit money banks at 45%, merchant banks at 14%, and retained the Liquidity Ratio at 30%.
In arriving at its decisions, Mr. Cardoso said: “The Committee was mindful of the effect of rising prices on households and businesses and expressed its resolve to take necessary measures to bring inflation under control.
“It re-emphasised its commitment to the banks’ price stability mandate and remained optimistic that despite the June 2024 uptick in headline inflation, prices are expected to moderate in the near term.”
This is in addition to other measures being pursued by the fiscal authority to address food inflation.
He, however, blamed the prevailing insecurity in food producing areas and high cost of transportation of farm produce for the increased pressure on inflation.
On how long the MPC plans to continue with the rate hike, the Governor said: “That will be as long as we can control and reverse galloping inflation. Once we achieve that, we will maintain the rates.
“We are all aware that in the Western world, they implemented rate hikes to control inflation and maintained them for a very long time. It is only recently that they have stopped rate hikes, but they have not yet started reducing the rates.
“It is important that we tighten and hold on for a little while and in no distant future, we will be able to slow down on the rate hikes.”
