Nigeria: Central Bank of Nigeria Raises Interest Rate to 27.50% Amid Inflation Battle

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has increased the benchmark interest rate to 27.50%, continuing its efforts to curb inflationary pressures and stabilize the nation’s economy. The announcement was made by the CBN Governor and Chairman of the MPC, Yemi Cardoso, during a press briefing in Abuja following the committee’s 298th meeting.

This decision marks a 25-basis-point increase from the previous rate of 27.25%, a more conservative move than many analysts had forecast, as expectations were for a 50-basis-point hike. Nevertheless, the MPC maintained its focus on achieving macroeconomic stability while adopting a measured approach.

Monetary Policy Decisions

The MPC retained other key parameters alongside the interest rate hike:

• Asymmetric Corridor: Maintained at +500/-100 basis points around the Monetary Policy Rate (MPR).
• Cash Reserve Ratio (CRR): Held at 50.0% for deposit money banks and 16.0% for merchant banks.
• Liquidity Ratio: Unchanged at 30.0%.

All 12 committee members unanimously endorsed these decisions, underscoring a shared commitment to mitigating inflation while promoting economic resilience.

A Track Record of Tightening

This latest adjustment marks the sixth consecutive increase in the MPR under Governor Cardoso’s tenure. Since his appointment, the CBN has raised rates by a cumulative 875 basis points, with notable adjustments including:

• February 2024: A significant 400-basis-point hike, raising the MPR from 18.75% to 22.75%.
• March 2024: A further increase of 200 basis points to 24.75%.
• Subsequent hikes: Incremental adjustments in May (26.25%), July (26.75%), and September (27.25%).

Governor Cardoso emphasized that these policy actions aim to tackle inflation, enhance economic stability, and foster sustainable growth.

Economic Context

Nigeria continues to grapple with high inflation, driven by a mix of domestic and external factors, including global economic uncertainty and local supply chain challenges. The MPC’s decision to raise interest rates reflects its strategic effort to anchor inflation expectations and safeguard the economy from potential shocks.

As the final monetary policy meeting of 2024 concludes, the CBN reiterates its commitment to adopting appropriate measures to ensure price stability and support economic recovery.