CBN raise interest rate to 18% to tame rising inflation

By Onome Amuge

The monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) has in its March 2023 meeting, raised the monetary policy rate (MPR) by 50 basis points from 17.5 per cent to 18 per cent.

Godwin Emefiele, the CBN governor made the disclosure  at a press briefing following the end of the monetary policy committee meeting held on Tuesday, 21 March 2023 ,at the CBN headquarters in Abuja.

According to Emefiele, the committee arrived at the decision after 10 of its 12 members voted to raise the MPR by 50 basis points.

Citing the gains of previous high rates as reason for the recent development, the CBN governor explained that the aim of the new rate was to keep inflation rate under control.

According to Emefiele, although the inflation has remained on the increase, the tightening measure has continued to reduce the rate of price increase

The monetary policy rate (MPR) is the baseline interest rate in an economy, intent on cushioning the effects of the country’s inflation rate and restoring investor sentiment.

The apex bank has maintained a hawkish rate policy since May 2022 as part of its move to stem Nigeria’s rising inflation rate which rose for the second  consecutive month in the year  to  21.91 per cent in February 2023.

The committee had in May 2022, and for the first time since September 2020, increased MPR by 150 basis points from 11.5 per cent to 13 per cent. In its following meeting in July 2022, the MPC  raised the MPR by 100 basis points to 14 per cent. The July increase represented the second consecutive hike in the MPR within two months.

An aggressive move to fight the surging inflation saw the CBN raise the MPR to 15.5 per cent in September. The benchmark interest rate was further increased by 100 basic points to 16.5 per cent in November, its highest level since 2001. Further hike was also seen in January 2023 when the  MPR was raised from 16.5 per cent to 17.5 per cent.