The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) has increased the benchmark interest rate by 150 basis points to 26.25 per cent from 24.75 per cent recorded at the end of last meeting.
The Governor of the CBN, Yemi Cardoso stated this at the press briefing after the 295th MPC meeting.
The CBN retained the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) at 45 per cent and also retained the Asymmetric corridor around the MPR at +100 /–300 basis points. The bank further maintained the liquidity ratio of banks at 30 per cent
The Governor of the CBN attributed the third consecutive hike in bank interest rates in 2024 to the bank’s continued efforts towards moderating inflation which is standing at 33.69 per cent in April 2024 according to the recent data from National Bureau of Statistics (NBS).
Also, he noted that members of the MPC the significant decline in other inflation such as food and core inflation suggest the positive effects of the apex bank’s hawkish monetary policy stance since the beginning of the year.
“The committees’ decisions during the meeting stated as follows, the MPR raised by 150 basis points to 26.25 per cent from 24.75 per cent, the asymmetric corridor retained around the MPR to +100 /–300 basis points. The Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) was retained at 45 per cent for Deposit Money Banks and 14 per cent for Merchant Banks and the liquidity ratio remained at 30 per cent.
According to him “The key focus of the MPC at this meeting remained to achieve price stability by effectively using tools available to the monetary authority to rein in inflation.
He identified food inflation as a key driver, attributing it to rising transportation costs, infrastructure challenges, insecurity, and exchange rate issues.
The inflation data showed that while year-on-year headline inflation in April 2024 rose moderately, the month-on-month headline food and core inflation declined significantly”
The CBN has taken different steps to address the falling value of the naira, including targeting cryptocurrency exchange Binance, recent gains appear to be short-lived.
The aggressive interest rate hike is an evidence of the CBN’s determination to combat inflation but its effectiveness is yet to be noticed in the economy.
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