CBN raises Monetary Policy Rate to 15.5%, CRR 32.5%

The Central Bank of Nigeria (CBN) has hiked the Monetary Policy Rate (MPR), which moderates the interest rate, to 15.5 per cent from 14 per cent, and the Cash Reserve Ratio (CRR) to 32.5 per cent in a bid to tame spiraling inflation.

This was made known on Tuesday by the Central Bank of Nigeria Governor, Godwin Emefiele, after the Monetary Policy Committee (MPC) meeting held in Abuja.

The CBN Governor said: “The Committee, the MPC, voted unanimously to raise the MPR to 15.5 per cent, retain the asymmetric corridor at +100 -700 basis points around the MPR; increase the Cash Reserve Ratio (CRR) to a minimum of 32.5 per cent and retain liquidity ratio at 30 per cent.”

In his explanation, Governor Emefiele said: “Members deliberated on the impact of the widening margin between the current policy rate of 14 per cent and the inflation rate of 20.52 per cent.

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“At this meeting, the option of reducing the policy rate was not considered as this would be gravely detrimental to reigning in inflation. The committee thus agreed unanimously to raise the policy rate to narrow the interest rate gap and reign in inflation. The committee thus voted unanimously to raise the MPR. 10 members voted to raise the MPR by 150 basis points, one (voted to raise it) by 100 basis points and one by 50 basis points. 10 members voted to increase CRR (Cash Reserve Ratio) by 500 basis points, while two members voted to increase it by 750 basis points.”

The National Bureau of Statistics (NBS) had announced recently that the inflation rate in Nigeria rose to 20.52 per cent in August 2022 from 19.64 per cent in July 2022.

The apex bank Governor pointed out that with the inflation rate at over 20 per cent, it was expedient to raise the benchmark interest rate closer to it, stressing that the normal thing was for the interest rate to be at par or slightly higher than inflation.

Mr Emefiele noted that as long as inflation continues to surge, the monetary authorities would do everything within its power to contain inflation by increasing the MPR, in order to reduce the negative interest rate at the moment.

He rationalised that this had influenced the MPC members’ decision to agree to mop up liquidity in the financial system by increasing the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs),, to 32.5 per cent from 27.5 per cent.

He reiterated that the CBN would take necessary action to ensure that the steps taken to lower the inflation rate in the country yield the desired results, pointing out that by Thursday, the 32.5 per cent CRR would take full effect.

The Cash Reserve Ratio (CRR) is the percentage of customers’ deposits with the Central Bank, which is used to control the supply of cash in the financial system when necessary.

Mr Emefiele informed newsmen that the Monetary Policy Committee (MPC), members, however, agreed to leave the Asymmetric Corridor at +100/-700 basis points around the MPR and the Liquidity Ratio at 30 per cent.

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CBN raises Monetary Policy Rate to 15.5%, CRR 32.5%

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CBN raises Monetary Policy Rate to 15.5%, CRR 32.5%