CBN raises interest rate to 18%, retains other parameters

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has voted to increase the benchmark interest rate by 50 basis points to 18 per cent.

The CBN Governor, Godwin Emefiele, disclosed this while reading the communiqué of the second MPC meeting of the year on Tuesday.

Addressing journalists at the end of the two-day meeting in Abuja, Mr Emefiele, said the committee voted to keep the asymmetric corridor at +100 and -500 basis points around the MPR.

Analysts in the country had predicted the Central Bank of Nigeria and the MPC may not raise the lending rates at the end of the Monetary Policy Committee.

However, the governor stated the slight increase is to mitigate the effect of inflation and other economic issues.

The MPR has been on the rise since April 2022, when it was 11.50 per cent.

The rate impacts lending and inflation rates, and, when jacked up, consequently affects upward movement of prices of goods and services.

He said, “The MPC committee voted to raise the MPR by 50 basis point to 18 per cent, retain asymmetric corridor at +100 and -500 basis points around the MPR.”

He added that although inflation has remained on the increase, the previous tightening measure has continued to reduce the rate of price increase.

Addressing fears of the effect of the hawkish posture on the banking industry, the CBN governor said the apex bank’s stringent micro and macro-prudential guidelines have ensured the stability and sustenance of the banking system.

The CBN governor cited factors such as the planned petrol subsidy removal as one of the reasons for the tightening stance of the monetary policy committee.

“Whether we like it or not, subsidy removal will likely be removed before the end of this administration in May,” Emefiele said.

“To reduce the gap in negative real rates we will continue to tighten but more moderately.”

Last week, Nigeria’s inflation rate rose to 21.91 percent amid the lingering scarcity of cash.

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.