The Monetary Policy Committee of the Central Bank of Nigeria hiked the benchmark interest rate from 14 to 15.5 percent in response to the spiraling rates of both local and global inflation.
From the 14% rate approved at the most recent MPC meeting in July, this is a hike of 150 basis points.
This would be the third time in five months that the apex bank will increase the Monetary Policy Rate, which is the same as the benchmark interest rate.
In May, the MPC increased the rate from 11.5 to 13 percent; it then increased to 14 percent in July; and finally, it increased it to 15 percent as a final blow to Nigerian businesses, particularly small and medium-sized businesses, who are already tight for cash.
Ten members voted in favor of the rate increase during the MPC meeting, according to CBN Governor Godwin Emefiele, who announced the results to journalists.
A further increase to 32.5 percent from 27.5 percent since July was made to the cash reserve ratio (CRR), which is the percentage of a bank’s total customer deposits held in cash at the central bank.
Following the MPC meeting, Emefiele made the announcements, noting that the members were worried about the inflation’s persistently aggressive pace “even after the rate hike at its meeting in May and July 2022, and expressed an unrelenting resolve to restore price stability while providing the necessary support to strengthen the fragile recovery.”
“We will keep increasing the interest rate to reduce the high effect of inflation,” Emefiele said, noting that “the tested monetary policy theory is that the easiest way to tame inflationary pressure is to raise rates.”
He added that the MPC believed that losing the policy stance could harm the economy given the fast policy normalization of the economies.
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