The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has announced a significant hike in the benchmark interest rate by 200 basis points, bringing it to 24.75 percent.
This decision, unveiled in a communique released on Tuesday by CBN Governor Yemi Cardoso after the second MPC meeting of his tenure in Abuja, marks the second rate increase under the current committee.
The new interest rate represents a notable increase from the previous rate of 22.75 percent, set by the MPC approximately a month ago. Cardoso emphasized the committee’s commitment to addressing the country’s escalating inflationary pressures, which stood at 31.70 percent in February.
In addition to the adjustment in the benchmark interest rate, the MPC opted to maintain the Cash Reserve Ratio (CRR) for deposit money banks at 45 percent. However, there was a modification in the CRR for merchant banks, which was raised from 10 percent to 14 percent.
Furthermore, the committee decided to uphold the liquidity ratio at 30 percent, indicating a strategic stance to manage liquidity in the financial system while prioritizing price stability.
Cardoso underscored the rationale behind these monetary policy measures, highlighting the urgent need to curb inflationary trends and stabilize the economy amidst prevailing economic challenges.
The decision to raise interest rates aims to tighten monetary conditions, discouraging excessive spending and lending while incentivizing savings, thereby mitigating inflationary pressures.
