The Central Bank of Nigeria (CBN) increases its Monetary Policy Rate once again as inflation pressures continue to rise.
Decision Follows Persistent Inflation Challenges
The Central Bank of Nigeria (CBN) has raised its Monetary Policy Rate (MPR) to 27.50% from 27.25%, marking its sixth interest rate hike in just nine months. This move comes after the conclusion of the CBN’s Monetary Policy Committee (MPC) meeting held on Tuesday, November 26, at the bank’s headquarters in Abuja. The decision highlights the central bank’s ongoing efforts to combat inflation, which has remained persistently high.
Unanimous Vote for Rate Increase
CBN Governor Yemi Cardoso confirmed that the committee voted unanimously to increase the MPR by 25 basis points. Alongside this, the central bank retained key policy parameters, including the Cash Reserve Ratio (CRR) for Deposit Money Banks at 50%, Merchant Banks at 16%, and the Liquidity Ratio (LR) at 30%. The Asymmetric Corridor, which sets a range of +500/-100 basis points around the MPR, also remained unchanged.
Inflation Drives Policy Tightening
This decision comes amidst Nigeria’s ongoing battle with inflationary pressures, further compounded by global economic instability. Despite the CBN’s aggressive stance on monetary tightening, inflation continues to outpace desired levels, prompting further rate hikes. With rising costs and economic instability, the central bank has worked relentlessly to control inflation by limiting the availability of money in circulation.
Rate Hikes Under Current Leadership
Since taking office over a year ago, the current leadership of the CBN has raised the MPR a total of six times, with the most recent hike in September. The total increase in interest rates since the leadership transition has reached 8.5%. This persistent tightening underscores the CBN’s commitment to stabilizing the economy and reducing inflation, although challenges remain.
Economic Impact and Outlook
As the CBN continues to implement tightening measures, Nigerians face rising costs, with inflation weighing heavily on their daily lives. While the MPR increase aims to curb inflation, it also makes borrowing more expensive, further complicating economic recovery. The CBN’s continued efforts in this direction indicate that more rate hikes could be on the horizon if inflation remains unchecked.
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