With the new increase in the monetary policy rate, the CBN has capped official interest rate at 18 per cent from 17.5 per cent in January, 2023.
The policy-setting committee of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which measures interest rate, from 17.5 percent to 18 percent.
Last week, Nigeria’s inflation rate rose to 21.91 percent
amid the lingering scarcity of cash.
The monetary policy rate (MPR) is the baseline interest rate
in an economy, every other interest rate used within an economy is built on it.
Godwin Emefiele, governor of the apex bank, announced the
development to journalists on Tuesday after the committee’s meeting at the CBN
headquarters in Abuja.
The development is the second consecutive time the apex bank
will be raising the benchmark rate this year.
Emefiele said the committee members voted to hike the rate
by 50 basis points to 18 percent, retain the asymmetric corridor at +100 and
-700 basis points around the MPR, retain the cash reserve ratio (CRR) at 32.5
percent and liquidity ratio at 30 percent.
He said although inflation has remained on the increase, the
previous tightening measure has continued to reduce the rate of price increase.
Addressing fears of the effect of the hawkish stance on the
banking industry, the CBN governor said the apex bank’s stringent micro and
macro-prudential guidelines have ensured the stability and sustenance of the
banking system.
He cited factors such as the planned petrol subsidy removal
as one of the reasons for the tightening stance of the monetary policy committee.
“Whether we like it or not, subsidy removal will likely be
removed before the end of this administration in May,” Emefiele said.
“To reduce the gap in negative real rates we will continue
to tighten but more moderately.”
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