 of the Central Bank of Nigeria (CBN) has increased the interest rate (MPR) to 18.75% from 18.5%, representing the highest interest rate in 22 years.){kind=link}
|
Listen now
|
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has increased the benchmark interest rate (MPR) to 18.75% from 18.5%, representing the highest interest rate in 22 years.
The announcement was made by the acting CBN governor, Folashodun Shonubi during a press briefing, after the two-day MPC meeting on Tuesday, 25th July 2023. This is the first MPC meeting chaired by the new acting CBN governor, following the suspension of Godwin Emefiele..
This is also the first MPC meeting under President Bola Tinubu’s administration.
Other MPC decisions include:
The MPR was increased by 25 basis points to 18.75%
The asymmetric corridor was narrowed to +100/-300 basis points around the MPR from +100/-700 basis points
CRR was retained at 32.5%
The liquidity Ratio was also kept at 30%
According to the MPC, the decision to further hike interest rate was driven by the rate of rising inflation in the country. Nigeria’s headline inflation surged to 22.79% in June 2023, which is the highest rate since September 2005. This is despite multiple interest rate hikes by the CBN in the last 14 months.
Although, inflation is expected to increase further on the back of the twin effects of petrol subsidy removal and the convergence of the exchange rate. Since the CBN switched the gear to a hawkish stance in May 2022, the interest rate has been increased by 725 basis points from 11.5% to 18.75%, while inflation has moved from 17.71% to 22.79%.
According to Mr. Shonubi, the hike in interest rate will help narrow the negative real rate of returns as well as encourage foreign investments.