The Central Bank of Nigeria (CBN) has raised the benchmark interest rate by 50 basis points to 18 per cent, up from 17.5 percent.
However, the apex bank retained all other parameters.
Briefing newsmen at the end of its 290th Monetary Policy Committee (MPC) meeting in Abuja, the CBN governor, Godwin Emefiele, said that out of 12 members, ten voted to increase the benchmark lending rate also known as monetary policy rate (MPR) by 50 basis points to 18 per cent, and one member voted to increase it by 25 basis points while the other voted for a hold.
However, all members voted to keep all other parameters constant by retaining the asymmetric corridors at +100/-700 points around the MPR, retaining the cash Reserve Ratio (CRR) at 32.5 per cent, and, retaining the liquidity ratio at 30 per cent.
In deciding to further hike interest rates, the MPC members noted with concern the continued upward pressure on inflation, the rising cost of debt and debt servicing as well as deteriorating fiscal balances which the members said remained headwinds that may undermine the smooth path to a faster recovery of the economy.
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CBN governor said “The Committee’s debate at this meeting, therefore, was whether to continue its rate hike to further dampen the rising inflation trajectory or hold to observe emerging development and allow for the impact of the last five rate hikes to permeate the economy. Loosening, in the view of members, would gravely undermine the gains achieved so far.
“The MPC observed the continued upward risk to price development around expectations on the removal of the premium motor spirit (PMS) subsidy; rising prices of other energy products, continuing exchange rate pressure; and uncertain climatic conditions. These in the view of members, provide a compelling argument for an upward adjustment of the policy rate, albeit, less aggressively.
“Members, thus, resolved by a majority vote to raise the Monetary Policy Rate (MPR) by 50 basis points. In Summary, ten (10) members voted to raise the MPR by 50 basis points, one (1) member voted to raise the MPR by 25 basis points and one (1) member voted to hold the MPR,” Emefiele stated.
He added that “All members voted to keep all other parameters constant. The MPC, therefore, voted for me. Raise the MPR by 50 basis points to 18.0 per cent; II. Retain the asymmetric corridor of +100/-700 basis points around the MPR; III. Retain the CRR at 32.5 per cent; and IV. Retain the Liquidity Ratio at 30 per cent.”
