The Central Bank of Nigeria (CBN) has increased interest rates on all its intervention loans by 4% from 5% to 9% per annum to ease the nation’s record high inflation rate.
Chibuzo Efobi, director of financial policy and regulations department of the CBN, disclosed in a circular to all banks and Other Financial Institutions (OFIs) dated August 17, 2022.
CBN had reduced interest rates on intervention loans from 9% to 5% per annum in the first quarter of 2020 to help curtail the impact of COVID-19 on businesses and the Nigerian economy at large.
However, the nation’s almost 20% inflation rate despite efforts to halt price increase has forced CBN to start mopping currency in circulation. One of the initiatives introduced in the last two months was to return interest on intervention loans.
This was announced just two days after the apex bank reviewed upward the minimum interest rate payable on savings deposits from 0.15% to 4.2%, 30% of the Monetary Policy Rate (MPR).
In the last two months, the CBN has risen the interest rate by 250 basis points to 14%, increase interest on intervention loans and raised minimum interest rate on savings deposits to contain inflationary pressure.
Nigeria’s inflation rose to 19.6% in the month of July as the value of the Nigerian Naira took a hit against global currency amid rising demand for the United States Dollar in an economy that depends on imports for most of its consumption.
This pushed prices of imported goods or locally made goods with imported items to a record-high as businesses were forced pass to increase in cost to final consumers.