CBN raises monetary policy rate for the second time this year

As a result of rising inflation, the Monetary Policy Committee of the Central Bank of Nigeria unanimously agreed to raise the benchmark interest rate, also known as the monetary policy rate, from 13 to 14 percent, the second time this year.

CBN Governor Godwin Emeifele revealed this in the recent monetary policy committee meeting.

The Central Bank previously lifted the interest rate from 11.5 percent to 13.5 percent in May 2022 during the last committee meeting. However, because the inflation rate is still surging above 18 percent, the CBN has raised the rate even further to 14 percent.

The last time Nigeria implemented an interest rate of 14% was February 2019. The MPC claims that additional complementary measures taken by the central bank to address the expansion of the monetary supply did not successfully reduce the rise in higher inflation.

Emefiele, stated that the committee decided that the most logical course of action would be to tighten policy even more in order to successfully stop inflation's continuous upward trend.

On Tuesday, the apex bank maintained some parameters while raising the MPR rate.

Although the Cash Reserve Ratio (CRR) was set at 27%, the asymmetric corridor around the MPR remains between +100 and -700 basis points.

“Consequently, Committee resolved to increase the MPR by 100 basis points from 13 percent to 14 percent. In summary, MPC voted as follows: Increase MPR to 14% from 13, retain the Asymmetric Corridor at +100 and -700 basis points around the MPR, retain the CRR at 27.5 percent and retain liquidity ratio at 30 percent,” Emefiele said.

Thus, the Monetary Policy Rate (MPR) was unanimously raised by the committee, according to Emefiele.

Members of the MPC were also wary that although output growth was still brittle, the population's spending power might suffer if inflation was not restrained.

Due to soaring food and diesel prices, Nigeria's inflation reached its highest point in more than five years in June.

According to the National Bureau of Statistics, the inflation rate increased significantly from the previous month's 17.71 percent to 18.60 percent in June. The country hasn't seen a rate this high since January 2017.

According to the NBS, the rate is 0.84 percentage points higher than the rate of 17.75 percent that was recorded in June 2021.

The Lagos Chamber of Commerce and Industry (LCCI) recommended the Central Bank of Nigeria (CBN) to implement more accommodating supply-side policies to promote the key sectors at its third quarterly media briefing on the state of the Nigerian economy.

According to the chamber, an increase in rates alone won't stop inflationary pressures.

The importance of the apex bank paying attention to increasing supply and mitigating growing production costs brought on by the massive cost of energy and raw materials was emphasized.