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CBN Raises Interest Rate to 26.25% Amid Soaring Inflation

Following a two-day meeting, CBN Governor Yemi Cardoso, who also chairs the MPC, announced the decision on Tuesday.

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The Central Bank of Nigeria (CBN) has increased the interest rate by 150 basis points, raising it from 24.75% to 26.25%.

This marks the third consecutive rate hike by the bank’s Monetary Policy Committee (MPC) as it strives to control the country’s escalating inflation, which reached 33.69% in April 2024.

Following a two-day meeting, CBN Governor Yemi Cardoso, who also chairs the MPC, announced the decision on Tuesday. “The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held its 295th meeting on the 20th and 21st of May 2024 to review recent economic and financial developments and assess risks to the outlook,” Cardoso stated.

“The committee’s decisions are as follows: 1. Raise the MPR by 150 basis points to 26.25 percent from 24.75 percent,” he said.

Despite the increase in the Monetary Policy Rate (MPR), the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) remains at 45%. The MPC also maintained the Asymmetric Corridor around the MPR at +100 and –300 basis points and kept the liquidity ratio at 30%.

Governor Cardoso acknowledged the nation’s rising inflation levels and emphasized that the primary focus of the MPC meeting was to achieve price stability by leveraging available tools to curb inflation. He attributed the inflationary pressure mainly to food inflation, driven by increasing transportation costs, infrastructure challenges, security issues, and exchange rate fluctuations.

Monday’s announcement comes against the backdrop of soaring commodity prices and a rising cost of living in Nigeria. The removal of the fuel subsidy last year and the floating of the naira have exacerbated the situation, leading to historic inflation levels.

Despite protests and pressures from labor unions, President Bola Tinubu has urged Nigerians to remain patient, expressing confidence that his administration’s reforms will eventually yield positive results.

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