The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has voted to raise interest rate to 13 percent from the previous rate of 11.5 percent.
MPC’s decision to raise the benchmark interest rate was announced by the apex bank’s Governor, Mr Godwin Emefiele while briefing newsmen shortly after the meeting, Tuesday May 24, 2022 in Abuja.
The current hike which was the highest in more than two years was meant to bring to heel the rising inflation.
According to Emefiele, the Committee noted that the current rise in inflation may be inimical to growth, and thus hinder the full recovery of the economy.
He said, after much deliberations, the Committee decided by unanimous vote to raise the Monetary Policy Rate (MPR).
He said, six (6) members voted to raise the MPR by 150 basis points, four (4) members by 100 basis points, and One (1) member by 50 basis points.
In summary, he said, “the MPC voted to:
I. Raise the MPR to 13.0 per cent;
II. Retain the asymmetric corridor of +100/-700 basis points around the MPR;
III. Retain the CRR at 27.5 per cent; and IV. Retain the Liquidity Ratio at 30 per cent”.
Speaking on the consideration of the committee, Emefiele said, MPC was concerned about the somewhat aggressive rise in inflation by almost 90 basis points in April, 2022, therefore, “feels that tightening would help rein in inflation before it assumes a galloping trend”.
He said, “while it may seem contradictory to raise rates in the face of fragile growth, this is the dilemma that most Central banks around the world are grappling with at the moment. Yet, on balance, it is quite clear and compelling that tackling inflation is more urgent in the sequence of policy objectives”.
He said, while growth concerns remain paramount to the Committee, the persistent uptick in domestic price levels was clearly a downside risk to growth, that must be addressed urgently.
In this regard, he said, the MPC urged the Bank to redouble its efforts at supporting the priority growthenhancing sectors of the economy while urging the Federal government to do more to provide a safe and secure environment for economic agents to boost activities and growth.