The Central Bank of Nigeria (CBN) led monetary policy committee has raised Nigeria’s interest rate by 50 basis points from 18% to 18.5% as the inflation rate continues to rise.
Nigeria’s inflation rate rose to 22.22% in the month of April despite efforts to rein in prices and deepen economic productivity.
According to the committee, the persistent increase in headline inflation remained the biggest challenge confronting macroeconomic stability in Nigeria. The persistent increase in inflation was attributed to a host of non-monetary issues outside the reach of the central bank such as the perennial scarcity of Premium Motor Spirit (PMS) and expectations of short-term hikes in the pump price of PMS, the high and rising price of various energy sources, and a host of headwinds confronting the food supply chain.
Ten members voted to raise the rate by 50 basis points while one member voted for 25 basis points increase. All members voted to keep all other parameters constant.
“Reviewing the argument to further hike the policy rate in a bid to subdue aggregate demand, Members noted that the current uptrend in inflationary pressure was driven by a combination of both demand and supply side issues.
“The MPC observed the continued 10 upward risk to price development driven primarily by expectations of rising energy and food prices; unabating security challenges in food producing areas; as well as persisting exchange rate pressure.
“The Committee thus felt it was expedient to continue to address the demand-side issues falling within the ambit of its policy tools.”
