The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate (MPR), raising it from 18.75 percent to 22.75 percent.
Olayemi Cardoso, the Governor of the CBN, disclosed this decision at a press conference held in Abuja on Tuesday following the committee’s meeting.
This adjustment marks the first monetary policy decision made by the committee since Cardoso assumed office on September 26, 2023.
The MPR serves as the baseline interest rate in the economy, influencing other interest rates within the financial system.
Cardoso explained that the committee raised the MPR by 400 basis points to 22.75 percent and adjusted the asymmetric corridor accordingly. Additionally, the cash reserve ratio (CRR) was increased from 32.5 percent to 45 percent, while the liquidity ratio remained at 30 percent.
The decision to raise the MPR comes amidst rising inflation rates, with January 2024 seeing a spike to 29.9 percent compared to 28.92 percent in the previous month.
Cardoso attributed this surge to various factors including escalating energy costs, high fiscal deficits, and security challenges affecting major food-producing areas.
He said: “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.”
Looking ahead, Cardoso outlined the committee’s commitment to implementing measures to enhance investor confidence, attract capital inflows, and monitor both domestic and global economic developments.
The aim is to ensure that inflationary pressures and exchange rate volatility are moderated in the near term.
The CBN Governor announced that the next MPC meeting is scheduled for March 25 and March 26, 2024.
