The Central Bank of Nigeria CBN has increased the Monetary Policy Rate (MPR) in an effort to bring down the rising inflation rate in the country,
The MPR which measures the interest rate was raised from 14% to 15.5% for the third time this year.
The Governor of CBN Godwin Emefiele disclosed this at the end of the Monetary Policy Committee (MPC) meeting on Tuesday in Abuja.
The committee also raised the Cash Reserve Ratio (CRR) to 32.5% from 27.5%.
The CRR is the share of the bank’s deposit that must be kept within the Central Bank in the form of liquid cash, and it is used to control the supply of cash in the financial system when necessary.
“The committee, the MPC, voted unanimously to raise the MPR to 15.5% , retain the asymmetric corridor at +100-700 basis points around the MPR; increase the Cash Reserve Ratio CRR to a minimum of 32.5% and refrain liquidity ratio at 30%.
Members deliberated on the impact of the widening margin between the current policy rate of 14% and the inflation rate of 20.52%”. He said
“At this meeting, the option of reducing the policy rate was not considered as this would be gravely detrimental to reigning in inflation. The committee thus agreed unanimously to raise the policy rate to narrow the interest rate gap and reign in inflation.
“The committee thus voted unanimously to raise the MPR. 10 members voted to raise the MPR by 150 basis points, one (voted to raise it) by 100 basis points and one by 50 basis points. 10 members voted to increase CRR (Cash Reserve Ratio) by 500 basis points, while two members voted to increase it by 750 basis point,” he added.
Since the inflation rate is at over 20%, Mr. Emefiele explained that it was necessary to raise the benchmark interest stating that the normal thing was for the interest rate to be at par or slightly higher than inflation.
He maintained that the rising inflation rate influenced the MPC members’ decision, noting that the monetary authorities would continue to do everything possible to manage the inflation by, increasing the MPR so as to reduce the negative interest rate at the moment.
The Governor further reiterated the Central Bank’s resolve to take necessary actions to ensure that steps taken to tame the rising inflation rate yields positive results adding that the 32.5% CRR would take full effect on Thursday September 29th 2022.
Speaking to news men, Mr. Emefiele said the MPC members also resolved to leave the asymmetric corridor at +100/-700 basis points around the MPR and the liquidity ratio at 30%.
