The policy-setting committee of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which measures interest rates, from 17.5 percent to 18 percent.
Last week, Nigeria’s inflation rate rose to 21.91 percent amid the lingering scarcity of cash.
The monetary policy rate (MPR) is the baseline interest rate in an economy; every other interest rate used within an economy is built on it.
Godwin Emefiele, governor of the apex bank, announced the development to journalists on Tuesday after the committee’s meeting at the CBN headquarters in Abuja.
This is the second consecutive time the apex bank will raise the benchmark rate this year.
Emefiele said the committee members voted to hike the rate by 50 basis points to 18 percent, retain the asymmetrical corridor at +100 and -700 basis points around the MPR, and retain the cash reserve ratio (CRR) at 32.5 percent and the liquidity ratio at 30 percent.
He said that although inflation has remained on the rise, the previous tightening measure has continued to reduce the rate of price increase.
Addressing fears of the effect of the hawkish stance on the banking industry, the CBN governor said the apex bank’s stringent micro- and macro-prudential guidelines have ensured the stability and sustenance of the banking system.
He cited factors such as the planned removal of the gasoline subsidy as one of the reasons for the tightening stance of the monetary policy committee.
“Whether we like it or not, subsidy removal will likely be completed before the end of this administration in May,” Emefiele said.
“To reduce the gap in negative real rates, we will continue to tighten, but more moderately.”