Business a.m.
The Central Bank of Nigeria (CBN) has announced a 150 basis points increase in the benchmark interest rate, raising it from 24.75 percent to 26.25 percent. The move marks the third rate hike by the Monetary Policy Committee (MPC) amidst its determination to stabilisse prices and maintain economic stability.
The decision was revealed by CBN Governor Olayemi Cardoso, who also serves as the Chairman of the MPC following the conclusion of the 295th MPC meeting held in Abuja on Monday and Tuesday.
In addition to the interest rate increase, the MPC maintained the asymmetric corridor around the MPR at +100/-300 basis points, retained the cash reserve ratio of deposit money banks at 45 percent, and kept the liquidity ratio at 30 percent.
According to Cardoso, the MPC’s primary focus remains on achieving price stability through the effective use of available monetary policy tools. He noted that while year-on-year inflation saw a moderate rise in April 2024, the month-on-month headline food and core measures experienced significant declines.
The MPC also addressed the challenges hindering effective moderation of food inflation, citing factors such as high transportation costs for farm produce, infrastructure constraints, security issues in food-producing regions, and the impact of exchange rates on imported food items. To tackle these obstacles, the MPC urged increased efforts to enhance security in farming communities, ensuring a boost in food production and promoting a more stable economic environment.
The CBN governor also commented on the persistent instability of the Nigerian currency, stating that it is a consequence of the country’s free market system. According to Cardoso, the recent volatility in the foreign exchange market is due to seasonal demand, reflecting the dynamic interplay between supply and demand in a freely functioning market.
Furthermore, Cardoso noted that the MPC has observed a marginal increase in foreign reserves between March and April 2024.
