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CBN raises Monetary Policy Rate to 18%



Positive impact on inflation

The Central Bank of Nigeria (CBN) increased the Monetary Policy Rate (MPR) from 17.5 percent to 18 percent to curb inflation. The announcement was made by CBN Governor Godwin Emefiele after the CBN’s Monetary Policy Committee meeting. MPR is the interest rate that the CBN charges commercial banks, which lenders use as a reference point for calculating interest rates on loans. When the CBN raises MPR, banks hike loan or debt interest rates.

According to Emefiele, the MPC’s various increases in the interest rate have had a positive impact on the inflation rate. He added that further rate hikes will not adversely affect the banking industry in Nigeria, and that loosening the interest rate will affect the gains achieved so far.

Rate increase and voting

Emefiele said that 10 members of the MPC voted to raise the MPR by 50 basis points, leading to the MPC raising the interest rate to 18 percent. One member voted to raise the MPR by 35 basis points.

Speaking on reasons for increasing the rate, Emefiele said that the MPC examined the possible impact of further policy rate hikes on the stability of the banking system. The committee was convinced that further rate hikes would not adversely impact the stability of the banking system. However, the committee called on the bank’s management to strengthen its regulatory oversight of the banking system to ensure its stability and resilience.

Continued inflation risk

The MPC noted that while the continued rise in headline inflation remains a significant problem confronting the economy, other macroeconomics were moving in the right direction despite observed headwinds. The committee debated 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 the members (MPC) will gravely undermine the gains so far achieved. The committee observed the continued upward risk to price development around expectations of the removal of the PMS (Premium Motor Spirit) subsidy, rising prices of other energy sources, continued exchange rate pressure, and uncertain climatic conditions.

In summary, the CBN’s increase in the MPR is aimed at curbing inflation, and the MPC believes that further hikes will not significantly affect the banking industry. While inflation remains a significant economic problem, other macroeconomic indicators are moving in the right direction. The committee called on the bank’s management to strengthen its regulatory oversight of the banking system to ensure that it remains stable and resilient.



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