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CBN raises benchmark interest rate to 18%

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has hiked the Monetary Policy Rate (MPR), also referred to as benchmark interest rate by 50 basis point (bps) to 18 per cent Tuesday on concerns of rising inflation.

The rate had earlier stood at 17.5 per cent.

Nigeria’s inflation rate accelerated to 21.91 per cent in February 2023 from 21.82 in January, fueled essentially by cost of energy, food and naira scarcity, according to the National Bureau of Statistics (NBS).

Statistics from the NBS showed that Nigeria’s annual Gross Domestic Product (GDP) growth rate slowed to 3.10 per cent in 2022, compared to 3.40 per cent in 2021.

The increase in MPR was disclosed by the CBN Governor, Godwin Emefiele, on Tuesday while reading the communiqué of the second MPC meeting.

He said the committee also pegged the liquidity ratio at thirty per cent.

The tightening of the rate according to the apex bank governor is expected to curtail inflation currently put at 21.91 percent.

Addressing journalists at the end of the two-day meeting in Abuja, Emefiele said the committee voted to keep the asymmetric corridor at +100 and -500 basis points around the MPR.

He also disclosed that the MPC voted to keep the Cash Reserve Ratio (CRR) at 32.5 per cent, as well as the Liquidity Ratio at 30 per cent.

The CRR is the share of a bank’s total customer deposit that must be kept with the central bank in form of liquid cash while the bank’s liquidity ratio is the proportion of deposits and other assets they must maintain to be able to meet short-term obligations.

In January, the MPC raised its benchmark lending rate from 16.5 per cent to 17.5 per cent in a sustained push to control inflation and ease pressure on the naira.

On naira redesign, Emefiele explained that the bank aligns itself with the Supreme Court’s judgment as currency in circulation (redesigned naira) is now one trillion naira.

He said that the bank will continue to pump more currency into the system but with caution.

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