The Central Bank of Nigeria has increased the Monetary Policy Rate from 14% to 15.5% to curb inflation, OduNews reports.
CBN Governor, Godwin Emefiele, made this known on Tuesday after a Monetary Policy Committee meeting in Abuja.
Emefiele said, “The committee voted unanimously to raise the MPR…The MPC voted to raise the MPR to 15.5 and retain the asymmetric corridor at +100 -700 basis points around the MPR. Increase the Cash Reserve Ratio (CRR) to a minimum of 32.5% and retain liquidity ratio at 30%.”
Giving an explainer earlier, the apex bank’s governor said, “Members deliberated the impact of the widening margin between the current policy rate of 14 per cent and the inflation rate of 20.52 per cent.
“At this meeting, the option of reducing the policy rate was not considered as this would be gravely detrimental to reigning in inflation. The committee thus agreed unanimously to raise the policy rate to narrow the interest rate gap and reign in inflation. The committee thus voted unanimously to raise the MPR.
“10 members voted to raise the MPR by 150 basis points, one (voted to raise it) by 100 basis points and one by 50 basis points. 10 members voted to increase CRR (Cash Reserve Ratio) by 500 basis points, while two members voted to increase it by 750 basis points.”
Emefiele added that as inflation continues to reign upward, the MPC will always hike rates to tame the pressure on citizens.
“The tested monetary policy theory is that the easiest way to tame inflationary pressure is to raise rates,” he added.
“CBN research study has shown that once inflation trends above 12.5 or 13 per cent, it will retard growth. So it is difficult for us, with all data available, not to go in a very aggressive way. To some, not expected because it increases the cost of borrowing, but this is the best we can.”