The Central Bank of Nigeria (CBN) has raised the interest rate by 150 basis points, increasing it from 24.75 percent to 26.25 percent.
Following a two-day meeting, the bank’s Monetary Policy Committee (MPC) agreed to raise the Monetary Policy Rate (MPR) for the third consecutive time to combat the country’s soaring inflation, which reached 33.69% in April 2024.
“The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held its 295th meeting on the 20th and 21st of May 2024 to review recent economic and financial developments and assess risks to the outlook.”
“Decisions of the MPC. The committee’s decisions are as follows: 1. Raise the MPR by 150 basis points to 26. 25 per cent from 24.75 per cent,” Cardoso announced.
Despite the interest rate hike, the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) was retained at 45 percent.
The MPC also maintained the Asymmetric Corridor around the MPR at +100 and -300 basis points and kept the liquidity ratio at 30 percent.
Cardoso acknowledged the rising inflation levels in the country and stated that the primary focus of the MPC meeting was to achieve price stability using available tools to control inflation.
He attributed the inflation pressure largely to food inflation, driven by factors such as rising transportation costs, infrastructure challenges, insecurity, and exchange rate issues.
The announcement comes amid skyrocketing commodity prices and an increasing cost of living.
Nigerians are grappling with historic high inflation levels, primarily driven by last year’s removal of fuel subsidies and the floating of the naira.
Despite protests and pressure from labor unions, President Bola Tinubu has repeatedly called for patience, expressing optimism that his government’s reforms will eventually yield positive results.
In recent months, the CBN has targeted the operations of cryptocurrency exchange Binance in an effort to combat the falling value of the naira.
While these measures initially led to an appreciation of the currency, the gains have stalled in recent weeks.