Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which measures interest rate, from 16.5 percent to 17.5 percent to tame rising inflation.
Gatekeepers News reports that the CBN Governor, Godwin Emefiele announced the decision of the apex bank’s policy-setting committee on Tuesday.
In December, Nigeria’s inflation rate fell slightly from 21.47 percent to 21.34 percent.
The monetary policy rate (MPR) is the baseline interest rate in an economy, every other interest rate used within an economy is built on it.
According to the CBN Governor, the MPC was of the view that, although the inflation rate moderated marginally in December, the economy remains confronted with the risk of high inflation with adverse consequences on the general standard of living.
Emefiele explained that loosening the rate would negate the objective of damping pent-up aggregate demand which fuelled inflation.
The CBN governor said, “One member voted to increase the MPR by 150 basis points, four members by 50 basis points, and seven members by 100 basis points. In summary, MPC voted to raise MPR to 17.5 percent.”
He noted that the committee also voted to retain the asymmetric corridor at +100 and -700 basis points around the MPR.
In addition, the committee also voted to retain the cash reserve ratio (CRR) at 32.5 percent and keep the liquidity ratio at 30 percent.
In other news, Emefiele insisted that the January 31 deadline for the phasing out of old naira notes remains sacrosanct.
He added that the time given for the deposit of the old naira notes was enough for Nigerians to go to commercial banks and get new notes.
The CBN Governor said, “I don’t have good news for those who feel we should shift the deadline; my apologies,” he said.
“The reason is because 90 days should be enough for those who have the old currency to deposit it in the banks.”