The Central Bank of Nigeria (CBN) has once again raised its benchmark interest rate in a bid to tackle inflation.Â
The Monetary Policy Rate (MPR) was increased by 50 basis points, moving it from 26.75% to 27.25%. This decision was made following the Monetary Policy Committee’s (MPC) latest meeting in Abuja, chaired by CBN Governor Olayemi Cardoso.
As part of a goal to tighten monetary policy, the CBN also increased the Cash Reserve Ratio (CRR) for commercial banks, pushing it up by 500 basis points to 50%.Â
Merchant banks were similarly affected, though with a smaller adjustment, seeing their CRR rise by 200 basis points to 16%. The liquidity ratio, however, remains unchanged at 30%, while the asymmetric corridor around the MPR was held at +500/-100 basis points.
Governor Cardoso emphasised that these were necessary to maintain pressure on inflation, which remains a huge issue for Nigeria’s economy. Despite some indications of moderating inflation, the MPC opted for further tightening to prevent a resurgence of price instability.
The consistent rise in interest rates, now in its fifth consecutive hike within the year is an issue for Nigerians. The CBN’s approach has been met with both support and caution, as stakeholders continue to assess the long-term impact of sustained high interest rates on economic growth and investment.
In his statement, CBN Governor justified the multiple interest rate hikes, stating that without these measures, inflationary pressures would have worsened, further straining the economy.Â
He noted the importance of keeping inflation in check, noting that no economic model could successfully alleviate poverty in an environment where inflation remains unchecked.
