APA – Lagos (Nigeria)
The Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele has announced that the Monetary Policy Committee (MPC) of the bank has resolved to increase the interest rate to 18.5 per cent.
The hike in the Monetary Policy Rate (MPR) which measures interest rate is the third consecutive time the MPC of the apex bank would be raising the interest rate.
The apex bank had increased the MPR from 11.5 per cent earlier last year to 18 per cent in March this year across six consecutive rate hikes.
Addressing journalists after the two-day MPC meeting in Abuja on Wednesday, Mr. Emefiele said that the committee voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR.
Emefiele stated that the 11 MPC members of the MPC at the meeting were faced with the dilemma of whether to hold or to hike the policy rates to offset the moderate increase in headline inflation.
“Considering the option of a hold-policy, the committee reiterated the empirical counterfactual evidence and believe that the rate hikes have indeed helped moderate continued rising inflation.
“In addition, the evidence revealed that the rate hikes also helped moderate growth in new credit and reduced a pent-up aggregate demand, which had continued to heighten inflationary pressure,” he said.
According to him, the members were unanimous in their conclusion that the current policy stance “was indeed impacting targeted parameters and yielding the expected outcome”.
Emefiele said that the MPC members were also convinced that the current uptrend in inflationary pressure was driven by a combination of both demand and supply side issues.
“The MPC observed the continued risk to price development driven primarily by expectation of rising energy and food prices, unabating security challenges in food producing areas, as well as persisting exchange rate pressure.
“The committee, thus, felt it expedient to continue to address the demand side issues falling within the ambit of its policy tools,” he said, adding that tightening would also support efforts toward moderating the demand-pool inflation as cost of funds increased.
“Members, therefore, resolved by unanimous decision to raise the MPR moderately.
“10 members voted to raise the MPR by 50 basis points and one member, by 25 basis. All members voted to hold all other parameters constant.
“Members voted to raise MPR to 18.5 per cent; to retain the Assymetric Corridor of +100/-700 basis points around the MPR, retain the Cash Reserve Ratio (CRR) of 32.5 per cent and retain the Liquidity Ratio of 30 per cent,” he added.
GIK/APA
Nigeria raises interest rate to 18.5%
