Just in: CBN hikes interest rate again, second time in 3 months
The Monetary Policy Committee of the Central Bank of Nigeria has voted in its February 2023 meeting to raise its monetary policy rate (MPR) to 18 per cent from 17.5 per cent, representing a 50 basis points increase.
This is the second interest rate hike in 2023 suggesting the apex is continuing with the hawkish rate policy started in the second half of 2022.
This was announced by the governor of the CBN, Godwin Emefiele at a press briefing following the end of the second monetary policy meeting for the year held between Monday 21 and Tuesday 22, 2023.
The decision of the CBN is made on the back of the rising inflation rate in the economy. Headline inflation rose to 21.91 per cent in February 2023 from 21.82 per cent recorded in the previous month, representing its highest level since September 2005.
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The asymmetric corridor of +100/-700 basis points around the MPR was retained, CRR was retained at 32.5 percent while the Liquidity Ratio was also kept at 30 per cent.
Addressing the fears of the effect of the hawkish stance on the banking industry, the CBN governor noted the bank’s stringent micro and macro-prudential guidelines have ensured that the stability and sustenance of the banking system are not at risk despite the hawkish stance.
Emefiele cited factors such as the planned fuel subsidy removal as the major reason why it needs to tighten.
“Whether we like it or not, subsidy removal will likely be removed before the end of this administration in May. To reduce the gap in negative real rates we will continue to tighten but more moderately.
He also mentioned that inflation tightening will be the strategy going forward however, it will be done moderately with one eye on the current effects of rate hikes in Europe and the US where banks are already citing it as a reason for failure.