CBN raises interest rate to 16.5%
- To reduce the volume of N500, N1,000 in circulation
- Buhari will unveil new naira banknotes today
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria has voted to raise the benchmark interest rate (MPR) by 100 basis points to 16.5%, the highest level since 2001.
This was revealed by CBN Governor Godwin Emefiele when reading the statement from the last MPC meeting of the year yesterday.
Nigeria’s inflation rate rose to 21.09% in October 2022 from 20.77% recorded the previous month, a sign of a further rise in the cost of goods and services, despite the CBN’s hawkish decision during of the last six months.
During the meeting, the MPC noted that the tightening will help restore investor confidence while curbing the rise in the inflation rate.
The committee voted unanimously to increase the MPR by 100 basis points to 16.5%. The asymmetrical corridor of +100/-700 basis points around the MPR was retained. The CRR was retained at 32.5%. While the liquidity ratio was also maintained at 30%.
Recall that the apex bank had raised the MPR from 11.5% earlier this year to 15.5% in three consecutive rate hikes.
To reduce the volume of N500, N1,000 in circulation
Emefiele also announced that the apex bank plans to reduce the volume of N500 and N1,000 notes in circulation over time.
Responding to questions about the One Thousand Naira note counterfeit facility and whether there are plans to reduce volumes, Emefiele said: “In the UK their highest denomination is 50 pounds but the most spent denomination is 20 pounds. Nobody spends 50 pounds. If you walk around with 50 pounds in the UK they will actually report you.
“The reverse is what is happening in Nigeria. Nigerians want to carry N500 and N1,000. And in fact, it is starting to be thought that the increase in the high denomination is also part of what is fueling inflation. So in fact yes we will launch N200, N500 and N1000 over time we will reduce the volume of N500 and N1000 in circulation.
“If you want to do high-value transactions, adopt online, adopt our agency program, adopt our mobile banking program, this is what you need.”
Buhari will unveil new naira banknotes today
The CBN has also confirmed that President Muhammadu Buhari will unveil the newly redesigned naira banknotes today.
The governor previously said that the new notes (N200, N500 and N1,000) would come into effect from mid-December 2022.
However, on Tuesday, Emefiele said the bank would no longer wait until December 15 to “unveil and release” the new note.
He said the unveiling would now be done today – 23 days earlier than the scheduled date – by the Buhari.
Efiele’s comment follows calls for an extension of the December 15 deadline by various stakeholders across the country.
We said that when the new currency comes out, legal tender will run alongside the old currency until January 31, 2023. That’s almost 100 days. 100 days is enough for anyone in any part of Nigeria to deposit their money in the bank and prepare to withdraw money when the new notes are released,” he said.
There are no plans to stop the Anchors Borrowers program
CBN also dismissed claims that it planned to shut down the Anchor Borrowers (ABP) program.
Emefiele said the apex bank will instead take a more aggressive approach to help farmers survive the impact of the devastating flood across the country.
Responding to the question about the program, he said, “We are gradually moderating our involvement in development finance. But that doesn’t mean we’re stopping, as some people have told you.
The CBN has given a total of 1.01 trillion naira to over 4.21 million smallholder farmers producing 21 commodities across the country through the PBA.
After the Real Sector Facility, the PBA has the second highest level of funding. The total amount disbursed to 426 projects nationwide through the Real Sector Support Facility (RSSF) so far is N2.10 trillion.