CBN lifts Interest Rate To 27.50%
Governor Olayemi Cardoso
CBN lifts Interest Rate To 27.50%.
Despite growing discontent among manufacturers about high interest rates, the Monetary Policy Committee of the Central Bank of Nigeria (CBN) has again raised the benchmark interest rate by 25 basis points from 27.25% to 27.50%
CBN Governor Olayemi Cardoso disclosed this to journalists at the end of the two-day 298th Monetary Policy Committee (MPC) meeting in Abuja on Tuesday.
Cardoso also disclosed that foreign reserves now stand at $40.88 billion enough to finance 17 months of imports.
The apex bank however retained the Cash Reserve Ratio (CRR) for Deposit Money Banks (DMBs) at 50% and 16% for Merchant Banks.
Cardoso said members of the MCP however agreed to hold other parameters unchanged.
“The Monetary Policy Committee (MPC) voted to raise Monetary Policy Rate (MPR) by 25bbasis points from 27.25% to 27.50%; retains Cash Reserve Ratio (CRR) for Deposit Money Banks (DMBs) at 50% and 16% for Merchant Banks.
“The committee retains the Liquidity Ratio (LR) at 30% and Asymmetric Corridor at +500/-100 basis points around the MPR”, he said.
Cardoso had said in July that the decision to raise the benchmark interest rate was an aggressive attempt to tame the persistent rise in food inflation and the nation’s headline inflation rate.
At its 297th MPC meeting held on September 23 and 24, the apex bank had raised the monetary policy rate (MPR), which benchmarks interest rates, from 26.75 percent to 27.25 percent – an increase of 50 basis points, emphasising concerns over core inflation, money supply growth, fiscal deficits, and food price pressures.
Retaining the asymmetric corridor around the MPR at +500/-100 basis points, the Cash Reserve Ratio of Deposit Money Banks was raised by 500 basis points to 50% from 45% and Merchant Banks by 200 basis points to 16% from 14%; the Liquidity Ratio was retained at 30%.
The MPC is the highest policy-making committee of the CBN, set up to review economic and financial conditions in the economy and determine the appropriate stance of policy in the short to medium term.
The committee is also in charge of examining the CBN’s monetary policy framework and making any necessary revisions.
CBN lifts Interest Rate To 27.50%.
The benchmark interest rate, also called the monetary policy rate (MPR), determines the cost of borrowing in the economy.
It can be considered the interest rate the CBN uses to lend to banks who then lend to customers at a higher rate.
Stakeholders in the manufacturing sector and economic policy analysts had raised concerns and warned the CBN against further hikes in interest rates.
The Manufacturers Association of Nigeria had expressed concern that the capacity of the manufacturing sector to play its strategic role of stimulating economic growth has been further constrained by the increase in interest rates.
