Economy
CBN Insists Rate Hike to 15.5% Not Textbook Economics
By Aduragbemi Omiyale
The Central Bank of Nigeria (CBN) has played down talks that its decision to increase the Monetary Policy Rate (MPR) by 1.50 per cent to 15.50 per cent from 14.00 per cent was purely academic or textbook economics.
On Tuesday, September 27, 2022, the apex bank raised the interest rate after its two-day Monetary Policy Committee (MPC) meeting in Abuja to tame inflation, which stood at 20.52 per cent in August.
The committee also increased the Cash Reserve Ratio (CRR) by 7.50 per cent to 32.5 per cent from 27.5 per cent in an aggressive move to ease the supply of funds in the financial system, which the bank believes was fuelling inflation in the country.
Before the rate hike this week, other central banks across the world had taken a similar step, and it was projected that Nigeria would follow suit without taking a critical look into the peculiar nature of the causes of inflation in the country, which include insecurity in the northern part of the nation, foreign exchange (FX) scarcity, and flooding, among others.
But the CBN has reacted to this, emphasising that different factors were taken into consideration before agreeing to jerk the rate higher by 150 basis points two days ago.
Speaking at the post-MPC hybrid media briefing in Abuja, the Director of the Monetary Policy Department of the CBN, Mr Hassan Mahmud, emphasised that the peculiarities of the Nigeria economy were taken into consideration at the gathering, noting that excess liquidity banks would always trigger a hike in rate.
“The CBN was very mindful of this and making sure that this is highly moderated because it’s also fuelling the liquidity we have within the system,” he stated.
Mr Mahmoud insisted that the volume of money in circulation was too much as this would continue to drive up prices, adding that the main objective of the CBN’s aggressive rates hike was to make the cost of funds more expensive.
On his part, the Director of the Banking Supervision Department at the apex bank, Mr Haruna Mustafa, expressed optimism that the latest increases in MPR and CRR would yield positive results.
According to him, the major problem in Nigeria is inflation, and when this is brought down, things will get better.
Mr Mustafa explained that the CRR serves monetary and prudential functions and will have far-reaching implications for the economy.
According to him, the decision of the MPC was complimentary to what had been done to rein in inflation, and they are not conflicting policy goals. They are complementary and work in line with our earlier intention.
By Adedapo Adesanya
The United States has lamented Nigeria’s import ban on 25 different products, particularly in agriculture, pharmaceuticals, beverages, and consumer goods, as it rationalised the recent decision to slap a 14 per cent retaliatory tariff.
The United States Trade Representative, in a statement on Monday posted on its X platform, said Nigeria’s restrictions on items like beef, pork, poultry, fruit juices, medicaments, and spirits limit US market access and reduce export opportunities.
“These policies create significant trade barriers that lead to lost revenue for US businesses looking to expand in the Nigerian market,” it wrote.
Last week, the administration of President Donald Trump imposed various tariffs ranging between 10 per cent and 65 per cent on different countries across the world, including Nigeria which got a 14 per cent tariff on its exports to the US.
In response, the Nigerian Minister of Trade, Industry, and Investment, Mrs Jumoke Oduwole, said Nigeria would take a pragmatic approach and will boost non-oil exports to deal with the drawbacks from the US move.
She also said Nigeria will be willing to negotiate and will be speaking with the World Trade Organisation (WTO) on the way forward.
On his part, the Minister of Finance, Mr Wale Edun, said that the Economic Management Team (EMT) would meet to assess the likely impact of the 14 per cent tariff on goods exported from Nigeria to the US.
He said the EMT will afterwards, make recommendations to cushion its impact on the nation’s economy.
The Minister also said the federal government will boost non-revenue as a means of cushioning the adverse effects to trade tariffs imposed on countries by President Trump.
Mr Edun also assured that while the adverse effect on Nigeria will be through an oil price plunge, the government is intensifying efforts to ramp up oil production and boost non-oil revenues.
By Adedapo Adesanya
Nigeria and Japan have launched a strategic venture capital initiative that will channel Naira-denominated investments into high-growth startups, shielding them from currency risks while unlocking access to long-term concessional financing.
The Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, met with officials from the Nigeria Sovereign Investment Authority (NSIA) and the Japan International Cooperation Agency (JICA) to finalise the framework of the fund, which has now received formal approval from the Japanese government.
Speaking on the development, Mr Edun welcomed the development, calling it a timely response to Nigeria’s youthful demography.
He said this fund provides critical financial backing across the capital structure—from equity to debt—and is aligned with President Bola Tinubu’s Renewed Hope Agenda for inclusive economic growth, he stated.
On his part, NSIA CEO, Mr Aminu Umar-Sadiq confirmed that the initiative satisfies two key conditions set by the Minister: mitigating foreign exchange volatility by investing in Naira and securing first-loss or grant capital to de-risk private investment.
“With JICA’s support, this is not just a proposed solution—it’s a fully approved, ready-to-launch initiative,” Mr Umar-Sadiq said.
By combining international concessional financing with domestic currency stability, the fund marks a new model for venture capital in Africa, aimed squarely at empowering the next generation of Nigerian innovators.
By Adedapo Adesanya
The Minister of Finance, Mr Wale Edun, has said the country’s Economic Management Team (EMT) would meet to assess the likely impact of the 14 per cent tariff on goods exported from Nigeria to the United States.
Mr Edun made the disclosure while speaking at an event organised by the Ministry of Finance Incorporated (MOFI) on Monday.
The Trump administration recently imposed various tariffs ranging between 10 per cent and 65 per cent on different countries across the world, including Nigeria which got a 14 per cent tariff on its exports to the United States.
He said the EMT will afterwards make recommendations to cushion its impact on the nation’s economy, noting that the federal government will boost non-revenue as a means of cushioning the adverse effects to trade tariffs imposed on countries by President Trump.
Mr Edun stated that while the adverse effect on Nigeria will result in an oil price plunge, the government is intensifying efforts to ramp up oil production and boost non-oil revenues.
The Finance Minister noted that the US, which is at the centre of the tariff war had on April 2, announced that it would exempt mineral exports, including oil.
“Therefore, it’s the price effect, the oil price effect that may affect Nigeria. And it is the job and responsibility of the economic management team of President Bola Ahmed Tinubu, amongst others, to look at the various scenarios that might play out.
“There’s global uncertainty at a huge level, so nobody knows exactly what will happen- the announcement that has been made. We’re not sure what will be delayed, what will be reversed, or what will be implemented.
“So, it is not an announcement that the budget is being reviewed. It’s an announcement that it is our responsibility to look at the various scenarios and options and advise government accordingly.”
Mr Edun also highlighted plans to look at budget adjustment, expenditure prioritisation as well as innovative non-debt financing strategies.
According to him, Nigeria had recorded a trade surplus in the last three years (2022-2024) with the US.
“Nigeria-US Trade has been in surplus in the last 3 years (2022-2024). Nigeria’s exports to the US were N1.8 trillion, N2.6 trillion and N5.5 trillion in 2022-2024, respectively.
“Fortunately, oil and mineral exports accounted for 92 per cent. Implying oil and minerals exports amounted to N5.08 trillion in value while non-oil was just N0.44 trillion.
“Consequently, the tariff effect on exports is negligible if we sustain our oil and minerals export volume.
“The adverse effect on Nigeria will be through oil price plunge. We are intensifying efforts to ramp up crude oil production to curtail any price effect
“We are also focusing on non-oil revenue mobilisation by FIRS and Customs, budget adjustment and prioritisation where possible, and also and innovative non-debt financing strategies,” the Minister said.
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