CBN raises benchmark interest rate to 14%

For the second time this year, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday increased the official interest rate by 100 basis points (bpts), bringing the total increase to 250 bps. in three months.

Speaking to the press after the meeting, CBN Governor Mr. Godwin Emefiele said the committee would continue to raise the benchmark rate if inflation continued on its growth path.

The committee increased the monetary interest rate (MPR) by 150 basis points in May 2022 – from 11.5% to 13%.

At the end of its July meeting, the MPC again announced another 100 basis point rate hike – to 14% from 13% in May.

The apex bank had kept the official interest rate at 11.5% to seek price stability conducive to growth.

The MPC believes that the easing will worsen the existing liquidity situation in the country and further dampen money market rates.

However, the MPC left other currency parameters constant around the MPR. This implies that the apex bank held the asymmetric corridor of +100/-700 basis points was also kept, the same for the cash reserve ratio at 27.5%, while the liquidity ratio was also kept at 30 %.

The bank also urged the federal government to address insecurity to allow the return of agricultural activities across the country and help reduce inflationary pressure on the supply side of the chain.

MPC called on the government to seek viable ways to resolve the petroleum product pricing issue to deal with the fuel shortage issue.

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CBN raises benchmark interest rate… CBN raises benchmark interest rate…

Stephen V. Lee