The Central Bank of Nigeria (CBN) has raised interest rates to 15.5 percent, the highest in the last 20 years.
Godwin Emefiele, the Governor of CBN, announced the increase shortly after the Monetary Policy Committee (MPC) meeting that was held at the CBN headquarters in Abuja on Tuesday.
The CBN Governor disclosed that all 10 members of the monetary policy committee voted for the hike to contain escalating inflation rate.
Investors King had earlier reported that central banks of the three biggest economies (Nigeria, South Africa and Egypt) are expected to raise interest rates in an effort to curb rising inflation.
Addressing journalists after the meeting, the CBN Governor stated that the committee will continue to increase interest rates to reduce the high effect of inflation.
The CBN governor was quoted to have said ” The tested monetary policy theory is that the easiest way to tame inflationary pressure is to raise rates”.
In August 2022, Nigeria’s inflation rose to 20.52 percent which is 17 years high. This has caused the Monetary Policy Committee (MPC) to increase interest rates to 14 percent.
The committee also raised the Cash Reserve Ratio (CRR) to 32.5 percent from 27.5 percent. Cash Reserve Ratio is the specified minimum percentage of a bank’s total deposits that must be in the custody of the Central bank in form of liquid cash.
Meanwhile, the recent hike in interest has generated mixed feelings among financial analysts and economic observers. While some analysts believed the hike is the way to go considering the inflation rate which currently stands at 20. 52 percent, others argued that the hike will affect borrowers who are due for repayment.
Analysts fear that borrowers might default in servicing their loans. Those who have taken credit facilities will have to pay more to reflect the new interest rates.
