CBN raises benchmark interest rate to 18.5%

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has raised the Monetary Policy Rate (MPR) to 18.5 per cent from the previous 18 percent in a bid to contain inflationary pressures.

The MPC also retained the asymmetric corridor at +100/-700 basis points around the MPR, kept unchanged Cash Reserve Ratio (CRR) at 32.5 percent and liquidity ratio at 30 percent.

The latest increase marks the third consecutive time the CBN will be raising the baseline interest rate this year.

The MPR is the benchmark rate that moderates interest rate in the financial system, and other rates used in any economy revolves around it, by raising the MPR, the CBN aims to influence borrowing costs, regulate liquidity, and encourage responsible lending practices.

Inflation rate in Nigeria last week rose to 22.22 percent amid the surge in food prices.

Mr. Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), who announced the MPR hike to journalists on Wednesday after the MPC’s meeting at the CBN headquarters in Abuja expressed the bank’s determination to address the aggressive inflationary pressure that has persistently challenged the economy.

He pointed out that the decision to increase the rate was based on extensive research conducted by the apex bank, disclosing that the inflation situation would have been even more severe if the bank did not take proactive measures to maintain a higher interest rate.

The CBN Governor emphasised that maintaining or loosening the rate would be counterproductive, as it could further exacerbate the inflationary pressure.

Delving further into the performance of the economy, Governor Emefiele underscored the importance of addressing the country’s crude oil production levels, whose current production level stands at 1.1 million barrels per day, stressing that the figure poses a considerable risk to the economy.

Emefiele emphasised the urgent need to ramp up production to meet the country’s OPEC-allotted quota of 1.8 million barrels per day.

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