The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has announced a significant increase in the benchmark interest rate, raising it by 200 basis points to 24.75 percent.
This decision was revealed in a communique issued on Tuesday by CBN Governor Yemi Cardoso following the second MPC meeting of his tenure, held in Abuja.
The latest adjustment marks a notable uptick from the previous rate of 22.75 percent set by the MPC just a month ago, constituting the second rate hike by the current committee.
In addition to the interest rate hike, the MPC opted to maintain the Cash Reserve Ratio (CRR) for deposit money banks at 45 percent while adjusting the CRR for merchant banks from 10 percent to 14 percent. The committee also retained the liquidity ratio at 30 percent.
According to Governor Cardoso, the committee’s decision was driven by concerns over escalating inflationary pressures and the imperative to stabilize inflation expectations while ensuring sustained exchange rate stability.
Nigeria’s headline inflation rate stood at 31.70 percent in February, largely fueled by a surge in food prices.
Highlighting the role of food insecurity in driving inflation, Governor Cardoso emphasized the importance of addressing this issue to mitigate current inflationary pressures.
He commended the Federal Government’s efforts in tackling food insecurity, including the distribution of palliatives.
The MPC’s decision coincides with recent actions by Nigerian authorities to crackdown on cryptocurrency platform Binance, with some executives detained and one escaping custody.
But while providing an update about Nigeria’s clampdown on the crypto platform, he said the CBN’s collaboration with other government agencies is yielding results.
“We consider ourselves as having the wherewithal to collaborate with other agencies of government and that is a very important function for us. About a month ago, we actually did have collaboration with law enforcement agencies, EFCC, the SEC, and other regulatory bodies as well, and what came out of that, is a work in progress, but very positive as far as I can say,” he said.
“The NSA, we’ve been sharing information together. However, in this particular case, the responsibility for regulating cryptocurrency is not our role, it isn’t ours; it is strictly that of the Security and Exchange Commission, not our responsibility.”
The next MPC meeting is scheduled to take place between May 20th and 21st, 2024.