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The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) has announced an increase in the country’s Monetary Policy Rate (MPR) from 18.5 per cent to 18.75 per cent. The decision was disclosed by Mr. Folashodun Shonubi, the Acting Governor of the CBN, during the presentation of the communique from the MPC meeting on Tuesday.
In addition to the MPR hike, the committee also adjusted the asymmetric corridor from +100/-700 to +100/-300 basis points around the MPR. The Cash Reserve Ratio (CRR) remains at 32.5 per cent, and the Liquidity Ratio is retained at 30 per cent.
Explaining the decision, Shonubi stated that the MPC was faced with two policy options: to hold the rate or marginally increase it to offset the moderate rise in headline inflation. After reviewing the impact of inflation on various macroeconomic variables, the committee recognized the potential dampening effect on output growth.
Members agreed that previous rate hikes had effectively moderated the pace of price development and were gradually achieving the expected outcome. Considering the possibility of continuing to hike the policy rate moderately, the committee weighed the expected liquidity injections into the economy from recent policy developments and their likely impact on inflation.
Ultimately, the MPC chose a moderate rate hike to sustain efforts at anchoring inflation expectations, narrowing the negative real interest rate gap, and boosting investor confidence. The decision to raise the Monetary Policy Rate (MPR) by 25 basis points was reached by a majority vote, with six members supporting the increase while five members voted to keep the MPR constant.
However, all members agreed to narrow the asymmetric corridor from +100/-700 to +100/-300 around the MPR. This move is aimed at maintaining a balanced approach that supports investment while working towards the recovery of output growth.
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