The Central Bank of Nigeria (CBN) has raised the monetary policy rate, which serves as national key lending rate, to 14 percent, in order to encourage savings and investment.
Speaking after the monetary policy committee (MPC) meeting in Abuja on Tuesday, Godwin Emefiele, governor of the bank, said the committee voted to hike interest rates in the face of rising inflation.
“The committee noted that the negative real interest rates did not support the recent flexible foreign-exchange market as foreign investors’ attitude had remained lukewarm, showing unwillingness in bringing in new capital,” Emefiele said.
“The Committee noted that inflation had risen significantly, eroding real purchasing power of fixed income earners and dragging growth.”
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He said the committee voted that MPR be raised from 12 percent in May to 14 percent — the highest in at least 10 years.
Cash reserve ratio (CRR) and liquidity ratio were maintained at 22.5 percent and 30 percent respectively.
“The MPC was further concerned that while the situation called for obvious tightening of the monetary policy stance, the technical recession confronting the economy and the prospects of negative growth to year-end needed to be factored into the policy parameters.”
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The committee commended the CBN’s introduction of a flexible foreign exchange regime.
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