- The Monetary Policy Committee of the Central Bank of Nigeria has raised the interest rate to 27.50 per cent
- The rate hike is aimed at tackling soaring inflation
- TheRadar had predicted the interest rate hike
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has raised the Monetary Policy Rate (MPR) by 25 basis points to 27.50 per cent from the previous rate of 27.25 percent.
The rate, which has been raised for the sixth time this year, is aimed at addressing surging inflation.
CBN governor, Olayemi Cardoso, announced the new rate during the 298th and last meeting of the MPC for the year, which was held at the bank’s headquarters in Abuja on Tuesday, November 26.
Cardoso also stated that the MPC retained the Cash Reserves Ratio (CRR) for Deposit Money Banks (DMB) at 50 per cent and 16 per cent for merchant banks.
The MPC retained the Liquidity Ratio (LR) at 30 per cent and asymmetric corridor at +500/-100 basis points around the MPR.
Cardoso said, “The committee was unanimous in its agreement to raise the monetary policy rate by 25 basis points to 27.50 per cent.
“The considerations of the meeting were held on the backdrop of renewed inflationary pressures as the headline food and core measures rose year-on-year in October 2024. Members therefore agreed unanimously to remain focused on addressing price developments.”
An interest rate hike was expected
Recall that TheRadar had reported that the CBN would hike the interest rate based on its precedent of doing so as an inflation-curbing strategy. This measure has implications for businesses and the broader economy as it further adds pressure on an already fragile economy.
The CBN’s approach deviates from that of other African central banks that are expected to cut or hold interest rates ahead of a Donald Trump presidency that could see US dollar-dominated funds, leading to higher US interest rates.
Eight of the 14 African monetary authorities scheduled to announce rate decisions within the next three weeks are expected to cut rates, while five are anticipated to hold steady. Nigeria is an exception.
Inflation-curbing strategy hasn’t worked
Despite the CBN’s tight monetary stance, inflation in Nigeria keeps surging. As of October, Nigeria’s inflation rate reached 33.88 per cent.
According to the Consumer Price Index (CPI) of the National Bureau of Statistics (NBS), the rate is a 1.18 per cent increase from the 32.7 per cent recorded in September 2024, attributed to the increase in transportation costs and higher food prices.
The inflation rate rose from 22.4 per cent in May 2023 to reach a new 28-year all-time high of 34.19 per cent in June.
It decelerated to 33.40 per cent in July after 19 months of increase and declined further for the second consecutive month in August to 32.15 per cent.
Beyond increasing MPR, how else can CBN tame inflation?
Meanwhile, TheRadar reported that at its 296th Monetary Policy Committee (MPC) meeting, the Central Bank of Nigeria (CBN) increased the Monetary Policy Rate (MPR) by 50 basis points to 26.75 per cent from the May rate of 26.25 per cent to tame inflation.
TheRadar highlighted other ways the apex bank can tackle inflation beyond increasing interest rates, which some Nigerians describe as ‘textbook economics.’
