The Central Bank of Nigeria (CBN) has raised the Monetary Policy Rate (MPR), which measures interest rate, to 15.5 percent from 14 percent which is targeted at taming rising inflation in the country.
CBN Governor, Godwin Emefiele, made this increase known Tuesday, September 27, 2022 after an MPC meeting in Abuja, while briefing reporters.
The policy-setting committee of the Central Bank of Nigeria (CBN) raised the monetary policy rate (MPR), which measures interest rate, from 14 percent to 15.5 percent. This is the third consecutive increase in 2022.
It will be recalled in July, the CBN raised the MPR from 13 percent to 14 percent to tame rising inflation.
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.
According to the CBN Governor; “The committee voted unanimously to raise the MPR…The MPC voted to raise the MPR to 15.5, retain the asymmetric corridor at +100 -700 basis points around the MPR. Increase the Cash Reserve Ratio (CRR) to a minimum of 32.5% and retain liquidity ratio at 30%.”
He stated further; “Members deliberated the impact of the widening margin between the current policy rate of 14 percent and the inflation rate of 20.52 percent.
“At this meeting, the option of reducing the policy rate was not considered as this would be gravely detrimental to reigning in inflation. The committee thus agreed unanimously to raise the policy rate to narrow the interest rate gap and reign in inflation. The committee thus voted unanimously to raise the MPR.
“10 members voted to raise the MPR by 150 basis points, one (voted to raise it) by 100 basis points, and one by 50 basis points. 10 members voted to increase CRR (Cash Reserve Ratio) by 500 basis points, while two members voted to increase it by 750 basis points.
The committee also raised the cash reserve ratio (CRR) to 32.5 percent from 27.5 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.
Mr. Godwin Emefiele also said that the aggressive rate hike would shape the country’s economic growth.
He said further; “It was of the view that with the aggressive policy normalisation of the economies, losing the stance of policy will result in a sharp decrease of exchange rate leading to further hikes that will be afloat,”
“Also, it will help consolidate the impact of the last two policy rate hikes which is already reflected in the slowing growth rate of oil supply in the economy. We also understand that an aggressive rate hike will slow capital outflows and likely attract capital inflows and appreciate naira.
“We will keep increasing the interest rate to reduce the high effect of inflation”, he added.
