The Central Bank of Nigeria (CBN) on Tuesday increased its monetary policy rate (MPR) otherwise known as interest rate by 25 basis points to 27.50 percent due to a renewed inflationary trend.
This was revealed by CBN governor, Oluyemi Cardoso at the end of the Bank’s monetary rate meeting on Tuesday.
What The CBN Governor Said
Announcing the interest rate increase, CBN governor, Olayemi Cardoso stated the Monetary Policy Committee was unanimous in its decision.
“The Committee was unanimous in its agreement to raise the monetary policy rate by 25 basis points to 27.50 percent.
“The considerations of the meeting were held on the backdrop of renewed inflationary pressures as the headline food and core measures rose year on year in October 2024. Members therefore agreed unanimously to remain focused on addressing price developments,” Cardoso said.
Cardoso said the MPC voted unanimously to raise the MPR by 25 basis points from 27.25% to 27.50%; and retain the Cash Reserve Ratio (CRR) at 50% for Deposit Money Banks and 16% for Merchant Banks.
Nigeria’s Current Inflation Figures
In October, Nigeria’s core inflation rate surged to 33.88%, up from 32.7% in September according to data released by the National Bureau of Statistics (NBS). It marked the second consecutive month of rising inflation.
Food inflation rate also surged to 39.16 percent in October, compared to 33.77 percent in September creating an urgent need to control such inflationary pressures.
Pressure on the CBN
To control inflation, as the cost of living continues to rise, the central bank has faced increasing pressure to balance its monetary policy.
As such, the interest rate increase was widely expected with some analysts predicting up to a 50 points rate hike especially after the IMF rebased Nigeria’s growth rate prediction for 2024 to 2.9%.
Period Between Last Monetary Policy Meeting and Now
In the period between the CBN’s last Monetary Policy meeting in September and today, there has been significant inflation owing to multiple increase in the cost of Premium Motor Spirit (PMS) to slightly above N1,ooo per litre and an increase in food inflation.
There has however been some improvements in the country’s external reserves owing to increased remittances and relative exchange rate stability as a result of the ongoing economic reforms.
The latest interest rate hike represents the sixth increase since February, 2024.
