The Central Bank of Nigeria (CBN) led monetary policy committee has raised interest rate by another 100 basis points from 15.5% to 16.5%, the apex bank disclosed on Tuesday.
Godwin Emefiele, the central bank Governor, who chaired the meeting, said the decision was to ease escalating inflation rate and sustain gains recorded in recent months.
According to him, given that all the causative factors like rising inflation in advanced economies, slowing China growth, disruptions in the global supply chain, ongoing war in Ukraine and other dominant headwinds, loosen option was not desirable.
The governor who spoke with the press after the meeting, said key macroeconomic indicators suggest rebound in output growth for the rest of 2022, which may occur at a much-slower pace than earlier anticipated, in the light of unfolding domestic and external shocks to the economy.
The domestic shocks originate from the persisting insecurity inhibiting economic agents; rising cost of debt and debt servicing; deteriorating fiscal balances; increased spending as the 2023 general elections approach; and continued uptrend in inflationary pressure.
Nigeria’s inflation rose to a record high of 21.09% in October despite efforts by the central bank to rein in consumer prices and cushion growth.
Therefore, the member committee voted unanimously to raise the Monetary Policy Rate, with nine members voting to raise the interest rate by 100 basis points while two members voted to raise it by 50 basis points.
In summary, the MPC voted to:
I. Raise the MPR to 16.5 per cent;
II. Retain the asymmetric corridor of +100/-700 basis points around the MPR;
III. Retain the CRR at 32.5 per cent; and
IV. Retain the Liquidity Ratio at 30 per cent.