CBN increases interest rate to 22.75%

February 27, 2024 2:30 pm

The Monetary Policy Committee of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which benchmarks interest rates, from 18.75 percent to 22.75 percent.

Olayemi Cardoso, CBN’s governor, announced the rate adjustment at a news conference on Tuesday after the committee’s meeting in Abuja.

The MPR is the baseline interest rate in an economy, every other interest rate used within the economy is built on it.

The rate hike is the first monetary policy decision made by the committee since Cardoso assumed office on September 26, 2023.

Speaking to journalists, the CBN governor said the committee raised the MPR by 400 basis points to 22.75 percent, and adjusted the asymmetric corridor at +100 and -700 basis points from +100 basis points and -300 basis points around the MPR.

He said the committee also increased the cash reserve ratio (CRR) from 32.5 percent to 45 percent, while retaining the liquidity rate at 30 percent.

Speaking on inflation, Cardoso said the rate of change in prices of goods and services rose to 29.9 percent in January 2024 — up from 28.92 percent in the previous month.

According to the CBN governor, the hike in inflation is due to major factors such as rising costs of energy, high fiscal deficits and lingering security challenges in major food-producing areas.

“In addition, global factors such as tight financial conditions, and trade disruptions from ongoing geopolitical tensions remain significant upside risks to the outlook for domestic inflation. Forecasts therefore, indicate that inflation will remain on an upward trajectory in the near term, before commencing a descent,” he said.

He, therefore, said the committee will continue to put measures in place to boost investor confidence and attract capital inflows as well as continue to monitor developments in the global and domestic economies to ensure that inflationary and exchange rate pressures moderate in the near term.

Cardoso also said the next MPC meeting will be held on March 25 and March 26.