The Central Bank of Nigeria (CBN) has announced an increase in the monetary policy rate (MPR) from 26.75% to 27.25%.
This decision, made by the Monetary Policy Committee (MPC) during its 297th meeting, aims to tackle rising inflation in the country.
Olayemi Cardoso, the CBN governor, confirmed the 50 basis points increase during a press conference held in Abuja.
He emphasized that the hike is part of ongoing efforts to stabilize prices amid persistent inflationary pressures.
According to the National Bureau of Statistics (NBS), Nigeria’s inflation rate fell to 32.15% in August, marking a slight decrease for the second time in 2024.
However, Cardoso noted that while food inflation has moderated, core inflation remains high, primarily driven by rising energy prices.
“The uptrend poses severe concerns to members as it clearly indicates the persistence of inflationary pressures,” he stated.
In addition to the MPR increase, the MPC also raised the cash reserve ratio (CRR) from 45% to 50%.
The liquidity rate, however, was maintained at 30%.
These measures are part of the CBN’s broader strategy to control money supply and address foreign exchange demand pressures in the economy.
Cardoso highlighted the importance of working closely with the federal government to mitigate the impact of rising energy prices on inflation.
He expressed optimism that effective collaboration could help stabilize prices in the long term.
“The MPC was unanimous in recognizing that a lot more is required to actualize the bank’s price stability mandate,” he said.
The CBN governor acknowledged the growing fiscal deficit as a pressing issue.
He pointed out that the federal government has pledged not to rely on “ways and means” for monetary financing, which could exacerbate inflation.
Cardoso praised the federal government’s initiatives, particularly the opening of the Dangote Petroleum Refinery.
He stated that this development is expected to reduce transportation costs and ease food price pressures in the short to medium term.
“This is also expected to moderate foreign exchange demand for importing refined petroleum products,” he added.
The CBN governor reiterated the need for sustained efforts to achieve a positive real interest rate.
He stated, “To attract investments into the economy, efforts must be sustained.”
Business owners, especially in sectors sensitive to interest rates, are particularly concerned about the potential impact on loans and investments.
Nigeria has faced numerous economic challenges, including fluctuating oil prices, security concerns, and a struggling currency.
The CBN’s aggressive monetary policies are seen as attempts to restore confidence in the economy and promote stability.
