The policy-setting committee of the Central Bank of Nigeria (CBN) has voted to raise the monetary policy rate (MPR), which measures interest rate, to 13 per cent.
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.
Godwin Emefiele, governor of the apex bank, said six out of eleven committee members voted to raise the key rate.
Highlights of the Committee’s decision
- MPR raised to 13%
- The asymmetric corridor of +100/-700 basis points around the MPR was retained
- CRR was retained at 27.5%
- While Liquidity Ratio was also kept at 30%
The latest hike in rates by the central bank’s monetary policy committee is the first since July 2016 as the apex bank preferred lower interest rates hoping it will spur lending.
- However, with inflation rising globally, the apex bank has joined the global trend of increasing interest rates to combat a sticky rising cost of goods in services.
- But unlike in global economies, Nigeria’s rising inflation is more supply-driven than demand thus leading pundits to believe CBN policies have little to no effect.
- The last time the central bank raised rates were in July 2016 when rates moved from 12% to 14% and remained that way until March 2019 when they dropped to 13.5% signaling the CBN’s plan to stop its juicy OMO sales
- Since then, interest rates dropped to 12.5% in May 2020 in response to Covid-19 and on September 11.5% which it has remained until the latest change it rates