The CBN has raised its benchmark lending interest rate to 18% in a push to contain the nation’s inflationary pressure. The Central Bank of Nigeria has raised interest rates to 18% to aggressively curb inflationary pressures in the country.
CBN Governor, Godwin Emefiele consequently made the announcement on Tuesday. This is after his Apex Bank Monetary Policy Committee (MPC) meeting which began on Monday.
Addressing journalists at the end of the two-day conference in Abuja, Mr Emefiele said the commission voted to keep the asymmetric corridor at +100 basis points and -500 basis points around his MPR.
Furthermore, he also announced that the MPC voted to keep the Cash Reserve Ratio (CRR) at 32.5% and the Liquidity Ratio at 30%.
CRR is the percentage of total bank customer deposits that the central bank must hold in cash, and the bank liquidity ratio is the percentage of deposits and other assets that banks must hold in cash to maintain fulfilling short-term commitments.
In January, the MPC raised its benchmark interest rate from 16.5% to 17.5% in a bid to contain inflation and ease pressure on the naira.
Mr Emefiele said the apex bank’s tightening measures had started to address inflationary pressure.
“We believe that as we continue this process that inflation will eventually begin to trend downwards,” he said.
“Whether we like it or not, between now and May, or the end of the administration, we will expect that subsidy will disappear. Subsidy removal has its own implication on prices which is inflation, so we are not optimistic that prices will continue to come down because of these measures but we feel we need to continue to tighten,” he said.
Accordingly, the important thing is for the committee to watch the margin between the policy rate and inflation.
He also said the margin has remained negatively wide-
“and in economics, when you find negative real rate, it is a disincentive to even investment”.
He argued that everything has to be put in place by the monetary policy authorities to reign in inflation.
Amid the uncertainties being faced by Nigerians due to the scarcity of the redesigned Naira notes, the nation’s inflation rate rose to 21.91% in February compared to 21.82% in January.
According to the nation’s statistics bureau, the February inflation rate showed an increase of 0.09% points. This is as compared to January’s headline inflation rate.
cc: Premium Times Ng
