CBN raises monetary policy rate or benchmark interest rate to 26.25%
The Central Bank of Nigeria’s Monetary Policy Committee has decided to raise the monetary policy rate or benchmark interest rate in the country by 150 basis points from 24.75 per cent to 26.25 per cent. This was announced by the CBN Governor at the conclusion of the 295th MPC meeting on Monday
The CBN Governor, Cardoso stated that The primary focus of the MPC during this meeting was to achieve price stability by effectively utilizing the tools at the disposal of the monetary authority to control inflation. Members noted that although year-on-year inflation in April 2024 increased moderately, the month-on-month headline food and core measures showed a significant decline. This decline in month-on-month headline and food measures in March 2024 indicates that the recent tight monetary policy stance of the bank is starting to produce the desired results.
The committee highlighted various challenges hindering the effective moderation of food inflation, such as the rising costs of transporting farm produce, infrastructure limitations in the distribution network, security issues in certain food-producing regions, and the impact of exchange rate fluctuations on domestic prices of imported food items. The MPC emphasized the need for more efforts to enhance the security of farming communities to ensure increased food production in these areas.
Cardoso further stated that the Cash Reserve Ratio (CRR) for Deposit Money Banks (DMBs) remained at 45 percent. The MPC also maintained the Asymmetric Corridor around the MPR at +100 and -300 basis points, while the liquidity ratio was retained at 30 percent.
The CBN governor acknowledged the increasing inflation levels in the country and emphasized that the main objective of the MPC meeting was to achieve price stability by utilizing available tools to control inflation. He attributed the inflationary pressure primarily to food inflation, highlighting the rising costs of transportation, infrastructure challenges, insecurity, and exchange rate issues as contributing factors. This announcement comes at a time when commodity prices are soaring and the cost of living is on the rise.
In an effort to address the depreciation of the naira, the CBN has recently taken measures to regulate the operations of cryptocurrency exchange Binance, which, along with other actions, has led to an appreciation of the currency.
