To combat growing inflation, the Central Bank of Nigeria’s (CBN) policy-setting council increased the monetary policy rate (MPR), which measures interest rates, from 15.1 percent to 16.5 percent.
Every other interest rate employed in an economy is based on the monetary policy rate (MPR), which serves as its foundation.
Speaking to reporters on Tuesday at the CBN offices in Abuja following the committee meeting, governor Godwin Emefiele said the increase in interest rates would continue to assist rein in growing inflation.
The committee also retained the cash reserve ratio (CRR) at 32.5 percent and retained the liquidity ratio at 30 percent
CRR is the share of a bank’s total customer deposit that must be kept with the central bank in the form of liquid cash.
According to Emefiele, at this time of high inflation loosening it “would greatly jeopardize the gains of previous policy rate hikes”.
He said due to all the causative factors such as Russia, the Ukraine war, supply chain disruptions, the slowdown in China, rising inflation in advanced economies, and other headwinds, it became dominant that a losing option was not desirable at this meeting.
“With a rise in inflation, loosening the stance of policy will lead to a more aggressive rise in inflation and will erode that gain already achieved through tightening as regards whether to hold MPC was of the view that they won’t stand at the period close to December festive and expected heavy spending during 2023 general election,” Emefiele said.
“MPC decided to continue to tighten, but at a somewhat more moderated rate, noting that tightening the stance of policy would narrow the negative real effective interest rate margin and force improve market sentiment and further restore investors confidence.”
