JUST IN: CBN increases interest rate to 26.25 %

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

This decision was made by the Monetary Policy Committee (MPC) to control Nigeria’s soaring inflation levels, which reached 33.69% in April 2024.

The MPC, led by CBN Governor Yemi Cardoso, met for two days to discuss economic and financial developments and assess risks.

The goal is to achieve price stability and combat inflation, driven mainly by food inflation and factors like transportation costs, infrastructure challenges, insecurity, and exchange rate issues.

The committee’s decisions include:

– Raising the Monetary Policy Rate (MPR) by 150 basis points to 26.25% from 24.75%

– Retaining the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) at 45%

– Setting the Asymmetric Corridor around the MPR at +100 and –300 basis points

– Retaining the liquidity ratio at 30%

The CBN chief admitted that rising inflation levels are a major concern, driven largely by food inflation, and cited factors such as transportation costs, infrastructure challenges, insecurity, and exchange rate issues as contributing to the problem.

This decision comes amid soaring prices of commodities and a rising cost of living, with Nigerians facing historic inflation levels.

The removal of fuel subsidies last year and the floating of the naira have contributed to the high inflation rates.

Despite protests and pressures from labor unions, President Bola Tinubu has repeatedly called for patience, expressing optimism that his government’s reforms will yield fruit.

In a bid to combat the falling value of the naira, the CBN has taken measures such as targeting the operations of cryptocurrency exchange Binance, which led to an appreciation of the currency. However, the gains appear to have stalled in recent weeks.