The Monetary Policy Committee of the Central Bank of Nigeria has raised the Monetary Policy Rate from 13 per cent to 14 per cent.
The action was taken on Tuesday barely two months after the MPC, during its bi-monthly meeting in May, raised the benchmark interest rate from 11.5 per cent to 13 per cent.
The interest rate hike came barely one week after the National Bureau of Statistics put its June inflation figure for the economy at 18.6 per cent, the highest in five years. Inflation had hit 17.71 per cent in May, 2022.
The MPC had left the MPR unchanged for over two years. However crippling inflation, worsening purchasing power and their attendant effects on the economy appear to have forced the CBN to effect policy changes.
Speaking shortly after a two-day MPC meeting that started on Monday, the Governor, CBN, Mr Godwin Emefiele, argued that a new rate hike was necessary to put the economy on track.
The CBN governor said the MPC noted with concern the continued aggressive movement in inflation, even after the rate hike at its last meeting.
Emefiele expressed the committee’s unrelenting resolve to restore price stability while providing the necessary support to strengthen the fragile recovery.
He however said all other parameters were left constant
“In summary, the MPC voted to increase the MPR from 13.0 to 14.0 per cent; retain the asymmetric corridor at +100/-700 basis points around the MPR; retain the CRR at 27.5 per cent; and retain the Liquidity Ratio at 30 per cent.
“As regards tightening policy stance, members were unanimous that given the aggressive increase in inflation, coupled with the resultant negative consequences, particularly on the purchasing power of the poor, as well as retarding growth, there is the need to continue to tighten.
“However, the policy dilemma was hinged around the level of tightening needed to rein in inflation, without dampening manufacturing output, which could result from the higher cost of borrowing.”
