Business a.m.
The Central Bank of Nigeria (CBN) has raised its key interest rate, the Monetary Policy Rate (MPR), by 50 basis points to 27.25 percent, marking the fifth consecutive hike in the rate so far this year.
In addition to the increase in the MPR, the CBN raised the Cash Reserve Ratio (CRR) by 500 basis points to 50 percent from the previous level of 45 percent.
Olayemi Cardoso,the CBN governor, disclosed the committee’s decision to maintain other key policy parameters unchanged, following a thorough assessment of the domestic and global macroeconomic conditions.
Cardoso, speaking at the conclusion of the two-day Monetary Policy Committee meeting in Abuja, also noted that the CBN retained the asymmetric corridor around the MPR at +100/-300 basis points, and the liquidity ratio (LR) at 30 percent.
The CBN governor, in his address, acknowledged the committee’s deliberations, which focused on the moderation in the country’s year-on-year inflation rate in July and August 2024.
Furthermore, he stated that the committee recognised the relative stability and convergence of the exchange rate across the various markets, attributing these positive outcomes to the bank’s firm monetary policy stance, which prioritised curbing inflationary pressure.
He stated further: “This is expected to improve confidence which will enable economic agents to plan in the medium to long-term. The committee was however unanimous in recognising that a lot more is required to actualise the bank’s price stability mandate.
“The MPC noted that even though headline inflation trended downwards due to a moderation in food inflation, core inflation has remained elevated, driven primarily by rising energy prices.”
Cardoso pointed out that the upward trend in energy prices, which the MPC identified as a cause for concern, reflects the persistence of inflationary pressures.
He therefore emphasised the MPC’s commitment to collaborating closely with the fiscal authority to find solutions to mitigate the current upward trend in energy prices.
The CBN governor highlighted the MPC’s awareness of the sustained growth in money supply, stressing the need to rein in excess liquidity in the system and alleviate foreign exchange demand pressures.
Cardoso added that MPC members also expressed worry about the fiscal deficits in the country. However, they also recognised the fiscal authorities’ pledge not to resort to monetary financing via Ways & Means.
