The Central Bank of Nigeria (CBN) has raised the Monetary Policy Rate (MPR) by 200 Basis Points from 22.75 percent to 24.75 percent.
Rising from its March Monetary Policy Committee (MPC) meeting on Tuesday in Abuja, the CBN Governor, Mr. Olayemi Cardoso announced that the Committee members voted to raise the MPR by 200bps from 22.75% held in February 2024 to 24.75%.
He said, the Committee also decided to adjust the asymmetric corridor around the MPR to +100/-300 basis points, Retain the Cash Reserve Ratio of Deposit Money Banks at 45.0 per cent, Adjust the Cash Reserve Ratio of Merchant Banks from 10.0 per cent to 14.0 per cent, and Retain the Liquidity Ratio at 30.0 per cent.
Mr. Cardoso said, the Committee focused on the current inflationary pressures and the need to anchor inflation expectations as well as ensure sustained exchange rate stability.
“These considerations underscore the importance of the CBN’s commitment to the price stability mandate and the need to urgently bring inflation under control to ensure that the purchasing power of ordinary Nigerians is restored in the short to medium term.”, he said.
The governor said, the members noted the continued rise in headline inflation, driven largely by food prices because of supply shortages and high cost of logistics and distribution.
Therefore, the Committee was of the view that addressing food insecurity is key to containing current inflationary pressures.
“On this note, Members commended the ongoing efforts of the Federal Government towards addressing food insecurity, some of these measures include the provision of various palliatives, release of grains from the strategic reserves, distribution of seeds and fertilisers, as well as farm implements for dry season farming.
“The Committee therefore called for the full implementation of the Federal
Government’s agricultural policies and programmes to improve food supply and further advised for broader fiscal consolidation, particularly on the improvements of tax collection and tax-to-GDP ratio”, he noted.
Cardoso said, “the Committee noted with satisfaction the level of stability achieved in the foreign exchange market in the last few weeks. This, in the view of Members, reflects the impact of the Bank’s recent policy actions and reforms, as well as increased transparency in the market.
“In addition, the Committee noted the efforts of the Bank in offsetting verified foreign currency obligations, an action that will greatly enhance investor confidence and attract foreign investments to Nigeria.
“The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The Committee thus, called on the Bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macroprudential guidelines.
“The MPC also enjoined the Bank to expedite action on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalized world.
“Consequently, at this meeting, the MPC was faced with the option of either progressing with its tightening cycle or hold, to observe the impact of the previous rate hike and adjustment of the Cash Reserve Requirement.
“After reviewing the balance of risks and the near-term inflation outlook, Members were convinced of the need to progress with the tightening cycle”, he said.
