Nigeria’s Central Bank MPC Raises Interest Rate to Combat Inflation

Oru Leonard 

In a bid to curb rising inflation, the Central Bank of Nigeria (CBN) has increased the Monetary Policy Rate (MPR) by 25 basis points to 27.50 percent, up from 27.25 percent.

A statement signed by the Governor,
Central Bank of Nigeria, Mr. Olayemi Cardoso today disclosed that the decision was made during the 298th meeting of the Monetary Policy Committee (MPC) held on November 25 and 26, 2024.

The MPC, comprised of 12 members, unanimously agreed to raise the interest rate to combat inflation, which has risen to 33.88 percent in October 2024, from 32.70 percent in September 2024. The committee also expressed concern over the persistence of price pressures, which have adverse impacts on citizens’ income and welfare.

To address these concerns, the MPC decided to:

– Raise the MPR: Increase the Monetary Policy Rate by 25 basis points to 27.50 percent from 27.25 percent.
– Retain the asymmetric corridor: Maintain the asymmetric corridor around the MPR at +500/-100 basis points.
– Retain the Cash Reserve Ratio: Keep the Cash Reserve Ratio of Deposit Money Banks at 50.00 percent and Merchant Banks at 16 percent.
– Retain the Liquidity Ratio: Maintain the Liquidity Ratio at 30.00 percent.

The MPC also commended the Federal Government’s efforts to improve security, particularly in the North-East, which is expected to improve food production. However, the committee expressed concern over the impact of rising energy prices on the general price level and the cost of production and distribution of food items and manufactured goods.

In addition to these decisions, the MPC noted the improvement in the external sector, reflected by the increase in the current account surplus, enhanced remittance, and capital inflows, which have positively impacted the external reserves. The external reserves rose marginally to US$40.88 billion as of November 21, 2024, from US$40.06 billion at the end of October 2024.

The next meeting of the MPC is scheduled to hold on January 27 and 28, 2025.