In a crucial move aimed at mitigating inflationary pressures and stabilizing the economy, the Monetary Policy Committee of the Central Bank of Nigeria has decided to raise the benchmark interest rate, the Monetary Policy Rate from 26.75 to 27.25 per cent.
The Monetary Policy Rate (MPR) is the foundation upon which all other interest rates in an economy are built. This baseline interest rate, as determined by the Central Bank, serves as a guiding principle for other interest rates, from commercial lending to consumer borrowing, and plays a crucial role in shaping the economic landscape.
In a press briefing following the fifth meeting of the year at the Central Bank of Nigeria’s headquarters in Abuja on Tuesday, Governor Olayemi Cardoso announced that the Monetary Policy Committee had voted unanimously to tighten monetary policy further. Speaking to journalists, Governor Cardoso explained that this decision was made in an effort to curb inflationary pressures and maintain price stability.
The Central Bank’s decision to raise the MPR by 50 basis points, from 26.75 per cent to 27.25 per cent, marks an incremental but significant increase in interest rates under Governor Cardoso’s leadership. This increase follows on the heels of a cumulative 8.5 per cent hike in interest rates during his first year in office.
Cardoso said, “The committee was unanimous in its decision to further tighten policy and thus decided as follows, one: raise the MPR to 27.25 per cent.”
Maintaining a delicate balance between monetary policy objectives and economic stability, the MPC also made several targeted adjustments to other key interest rates and ratios. The asymmetric corridor around the MPR was kept at +500 to -100 basis points, while the Cash Reserve Ratio for deposit money banks was raised by 500 basis points to 50 per cent and the Cash Reserve Ratio for merchant banks was increased by 200 basis points to 16 per cent from 14 per cent.
He added, “The MPC decided to retain the asymmetric corridor around the MPR at plus 500 to minus 100 basis points. It also raised the Cash Reserve Ratio of deposit Money banks by 500 basis points to 50 per cent from 45 per cent and merchant banks by 200 basis points to 16 per cent from 14 per cent and retain the liquidity ratio at 30 per cent.
