The Central Bank of Nigeria (CBN) on Tuesday raised the Monetary Policy Rate by 25 basis points to 27.50% from the 27.25 held in the last meeting.
CBN’s Governor, Mr Olayemi Cardoso announced the decision after the 298th meeting of the Monetary Policy Committee (MPC) of the bank in Abuja.
He said the Committee was unanimous in its decision to further tighten policy on the backdrop of renewed inflationary pressures, as the headline, food and core measures rose year-on-year in October 2024.
He said the Committee was particularly concerned that all three measures also inched up on a month-on-month basis, suggesting the persistence of price pressures, with attendant adverse impacts on income and welfare of citizens.
Following the development, Mr Cardoso said the Committee decided to raise the MPR by 25 basis points to 27.50 per cent from 27.25 per cent, Retain the asymmetric corridor around the MPR at +500/-100 basis points, Retain the Cash Reserve Ratio of Deposit Money Banks at 50.00 per cent and Merchant Banks at 16 per cent, and Retain the Liquidity Ratio at 30.00 per cent.
He explained that while food prices remain a key contributor to the uptick, Members commended the efforts of the Federal Government for the improved security, especially in the North-East of the country, which would likely improve food production.
“The Committee also noted the role of rising energy prices on the general price level due to its impact on factors of production, noting that the recent increase in the price of Premium Motor Spirit (PMS) has also impacted the cost of production and distribution of food items and manufactured goods.
“The Committee was optimistic that the full deregulation of the downstream sub-sector of the petroleum industry would eliminate scarcity and stabilise price levels in the short to medium term,” he added.
Cardoso said that the expressed concern over persisting exchange rate pressure, reflecting continued high demand in the market. Consequently, urged the Bank to explore measures to boost market liquidity.
He said the Committee members noted with satisfaction the continued resilience and stability of the banking system despite significant exogenous and endogenous headwinds.
“Key financial soundness indicators such as the Capital Adequacy Ratio (CAR), Non-Performing Loan ratio (NPL), Liquidity Ratio (LR), amongst others, remain strong.
“The MPC, however, called on the Bank to maintain its close surveillance on the banking system to sustain compliance with regulatory thresholds and continued health of the industry,” the CBN Governor said.
He added that the MPC acknowledged the efforts of the Bank in deepening financial inclusion, towards improving the transmission mechanism of monetary policy to enhance policy effectiveness.
