CBN raises interest rate to 27.25 per cent

Nike Popoola

The Central Bank of Nigerian (CBN) has raised the Monetary Policy Rate (MPR) by 50 basis points to 27.25 per cent from 26.75 per cent.

It also raised the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMB)by 500 basis points to 50.00 per cent from 45.00 per cent, and Merchant Banks by 200 basis points to 16 per cent from 14 per cent.

The Monetary Policy Committee (MPC) of the CBN raised the rate at the end of its 297th meeting that held from Monday to Tuesday (today),, to review recent

economic and financial developments, as well as assess risks to the outlook.

Eleven of the twelve members of the Committee were in attendance.

While announcing the hike, the Governor, CBN, Olayemi Cardoso, said, “The Committee was unanimous in its decision to further tighten policy and thus decided as follows: Raise the MPR by 50 basis points to 27.25 per cent from 26.75 per cent; Retain the asymmetric corridor around the MPR at +500/-100 basis points; Raise the Cash Reserve Ratio of Deposit Money Banks by 500 basis points to 50.00 per cent from 45.00 per cent and Merchant Banks by 200 basis points to 16 per cent from 14 per cent; and retain the Liquidity Ratio at 30.00 per cent.”

The CBN governor added that the Committee noted the moderation in headline inflation year-on-year in July and August 2024.

In addition, he said, the MPC noted the relative stability and convergence in the exchange rate across the various market segments, resulting from the Bank’s tight monetary policy stance. This is expected to improve confidence which will enable economic agents to plan in the medium to long term.

Cardoso said, “The Committee was, however, unanimous in recognising that a lot more is required to actualize the Bank’s price stability mandate. The MPC noted that even though headline inflation trended downwards due to a moderation in food inflation, core inflation has remained elevated, driven primarily by rising energy prices.

“The uptrend poses severe concerns to Members, as it clearly indicates

the persistence of inflationary pressures. Members thus, reiterated the need to

work in close collaboration with the fiscal authority to address the current

upward pressure on energy prices.”