The Monetary Policy Committee (MPC) of the Central Bank of Nigeria has increased the Monetary Policy Rate, also known as the interest rate, to 18.5 per cent from 18 per cent, representing its highest level in 22 years.
In the last meeting held in March, the CBN also moved the interest rate up from 17.5 per cent to 18 per cent. The financial regulator has been raising the rate since April 2022, when the MPR was 11.5 per cent.
Speaking after the meeting on Wednesday, governor of the CBN, Godwin Emefiele said the decision to increase the benchmark interest rate is made on the back of the rising inflation rate in the Nigerian economy.
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Headline inflation rose to 22.22 per cent in April 2023 from 22.04 per cent recorded in the previous month, representing its highest level since September 2005.
Emefiele stated that it has unanimously voted to hike its monetary policy rates or interest rates by 50 basis points, as 10 members voted for a 50 basis point hike and 1 member 25 basis point.
The CBN opined reducing MPR was not even considered and that a hold will be counterfactual to evidence on the ground. They also cited evidence that raising rates was reducing inflation which may have risen to as high as 32 percent as against 22.22 percent if rates were not aggressively raised in April.
Other indices include the asymmetric corridor of +100/-700 basis points around the MPR was retained, CRR was retained at 32.5 per cent, while the Liquidity Ratio was also kept at 30 per cent.
Nigeria has been grappling with a high inflation rate as well as a depreciating exchange rate both at the parallel and the official market.
Headline inflation rose to its highest level in over 17 years in April 2022, eroding the purchasing power of citizens.