The Central Bank of Nigeria (CBN) has once again raised its interest rate, increasing it by 25 basis points from 27.25% to 27.50%, in a bid to address the rising inflation in the country.
This decision was announced by the Governor of the CBN, Mr. Yemi Cardoso, who also serves as the Chairman of the Monetary Policy Committee (MPC), at the conclusion of the MPC meeting held in Abuja.
The Monetary Policy Committee unanimously agreed to the hike, raising the interest rate by 25 basis points to 27.50%, up from its previous level in September.
Meanwhile, the Committee decided to retain the Monetary Policy Reserve Ratio (CRR) at 50% for Deposit Money Banks and 16% for Merchant Banks.
The Liquidity Ratio (LR) remains unchanged at 30%, alongside the Asymmetric Corridor, which stays at +500/-100 basis points around the Monetary Policy Rate (MPR).
“The Committee has decided unanimously to further tighten its monetary policies and decided thus: one, raise the MPR by 25 basis points to 27.5%. Two, retain the asymmetry corridor around the MPR at +500/-100 basis point.
“Three, the committee retain the Cash Reserve Ratio (CRR) of deposit money banks at 50% and merchant banks at 16%. Four the committee decided to retain the liquidity ratio at 30%,” Cardoso said.
Considerations for a further rise in the rate
In addition, Cardoso stated that the committee’s decision was made against the backdrop of a renewed hike in inflationary pressure in the country.
He referenced the headline inflation, which, according to the National Bureau of Statistics (NBS), rose to 33.88% in October 2024.
According to Cardoso, the committee considered the following increases in inflation affecting price stability:
- Headline inflation
- Core inflation
- Food inflation
“The meeting was held on the backdrop of renewed inflationary pressures as the headline, food and core measures rose year-on-year in October 2024. The committee was particularly concerned all 3 measures also hitch up on a month-on-month basis, suggesting the persistence of price pressure with an adverse impact on the income and welfare of citizens.
“Members therefore agreed unanimously to remain focused in addressing price development,” Cardoso added.
What you should know
- Under Yemi Cardoso’s leadership, the CBN’s MPC has implemented six interest rate hikes to combat inflation, which currently stands at 33.88%.
- The first increase raised the rate from 18.75% to 22.75%, followed by subsequent hikes to 24.75% and 26.25%. In July 2024, a 50 basis point increase brought the rate to 26.75%.
- In September, the MPC implemented another 50 basis point hike, raising the rate to 27.25%.
- These hikes, totalling over 800 basis points since Cardoso’s tenure began, are aimed at tackling Nigeria’s persistent inflation challenges, particularly high core and food inflation.
