By Sunday Etuka, Abuja
Following the persistent upward trajectory of inflation rate in the country, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has raised the benchmark interest rate by 150 basis points, from the 24.75 percent held in March 2024 to 26.25 percent.
CBN Governor, Mr. Olayemi Cardoso disclosed this on Tuesday while briefing Finance Correspondents shortly after the Committee’s Meeting at the CBN Headquarters in Abuja.
While announcing the Committee’s decisions, Mr. Cardoso who Chaired the 295th meeting said, the Committee voted to “raise the Monetary Policy Rate (MPR) by 150 basis points to 26.25 per cent from 24.75 per cent, Retain the asymmetric corridor around the MPR to +100/-300 basis points, Retain the Cash Reserve Ratio of Deposit Money Banks at 45.00 per cent, and Retain the Liquidity Ratio at 30.00 per cent”.
Speaking on the Committee’s consideration, the CBN governor said, the key focus of the meeting remained to achieve price stability by effectively using tools available to the monetary authority to rein in inflation.
He said, the members observed that while year-on-year headline inflation in April 2024 rose moderately, the month-on-month measures of headline, food and core all declined significantly.
“This follows a decline (month-on-month) of headline and food measures in March 2024, suggesting that the recent tight monetary policy stance of the Bank is beginning to yield the desired outcomes”, he said.
Cardoso said, the MPC noted that the inflationary pressure continues to be driven largely by food inflation, thus reiterated several challenges confronting the effective moderation of food inflation to include: rising cost of transportation of farm produce; infrastructure-related constraints along the line of distribution network; security challenges in some food producing areas; and exchange rate pass-through to domestic prices for imported food items.
Therefore, the MPC urged that more be done to address the security of farming communities to guarantee improved food production in these areas.
According to him, the members further observed the recent volatility in the foreign exchange market, attributing this to seasonal demand, a reflection of the interplay between demand and supply in a freely functioning market system.
The Committee also noted the marginal increase in the external reserve balance between March and April 2024 and urged the Bank to sustain its focus on accretion to reserves.
He said, the MPC, however, commended the Bank for the recent approval of licenses of fourteen (14) international Money Transfer operators (IMTOs), which is expected to improve competition and lower the cost of transactions, thus attracting more remittances through formal channels.
The Committee, according to him, also noted with satisfaction that the banking system remains safe, sound, and stable, despite the headwinds confronting the economy. It commended the recent recapitalization initiative and urged the management to sustain its regulatory oversight to ensure the continued stability of the banking system.
Justifying the Committee’s position, he said, “Members focused on the best policy approach to continue to guide the economy towards achieving an overall macroeconomic balance. At this meeting, the Committee was thus faced with the option of either continuing with policy tightening or hold to observe the impact of previous rate hikes.
“Following an extensive review of risks and the near-term inflation outlook, the balance of risks suggests further tightening of policy to build on the benefits accruing from previous rate hikes”, he said.
