The Central Bank of Nigeria (CBN) has raised the interest rate by 150 basis points, bringing it from 24.75% to 26.25%, in a decisive move to combat rising inflation.
This marks the third consecutive increase in the Monetary Policy Rate (MPR) this year, as the country grapples with inflation levels hitting 33.69% in April 2024.
“The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held its 295th meeting on the 20th and 21st of May 2024 to review recent economic and financial developments and assess risks to the outlook. The committee’s decisions are as follows: raise the MPR by 150 basis points to 26.25% from 24.75%,” CBN Governor Yemi Cardoso, who also chairs the MPC, announced on Tuesday.
While the MPR saw an increase, the Cash Reserve Ratio (CRR) for Deposit Money Banks (DMBs) remained unchanged at 45%. Additionally, the MPC maintained the Asymmetric Corridor around the MPR at +100 and –300 basis points and retained the liquidity ratio at 30%.
Governor Cardoso emphasized that the central focus of the MPC meeting was to achieve price stability amid escalating inflationary pressures. He identified the primary driver of inflation as rising food costs, which are exacerbated by increasing transportation expenses, infrastructure deficiencies, security issues, and exchange rate fluctuations.
The announcement comes at a time when Nigerians are facing unprecedented inflation and a high cost of living. These economic challenges are largely attributed to the removal of fuel subsidies last year and the subsequent floating of the naira.
Despite mounting protests and pressures from labor unions, President Bola Tinubu has urged citizens to be patient, expressing confidence that the government’s economic reforms will eventually prove beneficial.
In an additional effort to stabilize the naira, the CBN has also targeted the operations of cryptocurrency exchange Binance, aiming to curb speculative activities that may be affecting the currency’s value.