CBN Raises Interest Rate to 15.5%, CRR to 32.5%
By Dipo Olowookere
The Central Bank of Nigeria (CBN) has increased the Monetary Policy Rate (MPR) by 1.5 per cent to 15.5 per cent from 14.0 per cent.
Governor of the CBN, Mr Godwin Emefiele, announced this rate hike on Tuesday while addressing reporters after the two-day Monetary Policy Committee (MPC) meeting in Abuja.
He explained that members of the MPC agreed to raise the rate at the September meeting to control the rising inflation rate in the country.
According to him, this was the best decision to take at this critical moment to ease Nigeria’s rising cost of goods and services.
Business Post reports that the National Bureau of Statistics (NBS) announced recently that inflation in Nigeria rose by 20.52 per cent in August 2022 from 19.64 per cent in July 2022.
Mr Emefiele said inflation at over 20 per cent was high, and it was necessary to push the benchmark interest rate closer to it, noting that the normal thing was for the interest rate to be at par or slightly higher than inflation.
The CBN chief said as long as the inflation continues to surge, the monetary authorities would continue to do the needful, increase the MPR, to reduce the negative interest rate at the moment.
He also informed newsmen that this was the main reason the MPC agreed to mop up liquidity in the financial system by increasing the cash reserve ratio (CRR) of deposit money banks (DMBs), also known as commercial banks, to 32.5 per cent from 27.5 per cent.
Mr Emefiele noted that the CBN would take drastic action to ensure that these steps taken to bring down the inflation yield the expected reasons, saying by Thursday, the CRR of 32.5 per cent would take full effect.
The CRR is the percentage of customers’ deposits with the central bank. It is used to control the supply of cash in the financial system.
He disclosed that the MPC, however, agreed to leave the Asymmetric Corridor at +100/-700 basis points around the MPR and the Liquidity Ratio at 30 per cent.