The Central Bank of Nigeria‘s Monetary Policy Committee (MPC) has hiked interest rate by 25 basis points from 18.5% to 18.75% on Tuesday.
The announcement was made by the acting Governor of the Central Bank of Nigeria, Mr. Folashodun Shonubi, during the press briefing held at the conclusion of the 292nd MPC meeting on Tuesday.
He said, “We have indicated and how that every time a rate increase has happened has moderated the rate of inflation,
“We agreed liquidity overhang was one of key challenges, in addition to interest rate hikes, we have come up with various ways to tighten liquidity, so that if it runs through inflation, it has impacts on the economy, not only rate change we are looking, we are looking at every tool to reduce inflation.
“We are not trying to unify the rate, we are encouraging the market to be efficient and that takes time, some of the volatility you are seeing is the market finding its level and reality of pent-up demand as current supply not sufficient, as we ease the demand we see a more efficient market that runs.”
This move comes after the Central Bank’s recent tightening of the economy by raising interest rates to 18.5 per cent in its last MPC meeting.
The continuous rises in inflation and the fluctuating exchange rates have put immense pressure on the President Bola Ahmed Tinubu government, who on assuming office suppended subsidy and float the local currency.
However, the various policy adjustments are yet to positively impact the economy as the Nigerian Naira weakened to N870 against the United States Dollar from N461 the new administration met it while pumping price is now hovering around N600 per litre across the nation.
According to Mr. Shonubi, the decision was necessary to curb inflation, protect the value of the national currency, and foster a more stable economic environment that can withstand the external shocks affecting the global financial landscape.
However, experts and stakeholders are divided in their opinions about the potential consequences of this move. While some view it as a necessary step to rein in the soaring inflation rates, others worry about its impact on consumer spending, borrowing costs, and overall business investment.