CBN raises MPR by 200bps to 24.75%

THE Central Bank of Nigeria (CBN) has again raised the benchmark interest rate as it continues to battle inflationary pressures stoking the country’s economy, hurting businesses, and worsening citizens’ hardships.

At the end of its two-day Monetary Policy Committee (MPC) meeting on Tuesday, March 26, the CBN increased the monetary policy rate (MPR), otherwise known as the benchmark interest rate, by 200 basis points (bps) to 24.75 per cent.

It retained the cash reserve ratio (CRR) of deposit money banks at 45 per cent and the liquidity ratio at 30 per cent but adjusted the CRR of merchant banks from 10 to 14 per cent.

The meeting marks the second MPC meeting for 2024 and the 294th meeting of the CBN committee.

At its February MPC meeting, the CBN raised the benchmark interest rate by 400 basis points to 22.75 per cent, CRR to 45.00 per cent, adjusted the asymmetric corridor to +100 to -700 and retained the liquidity ratio at 30 per cent.

“The considerations of the committee at this meeting focused on the current inflationary pressures and the need to anchor inflation expectations as well as ensure sustained exchange stability,” the CBN Governor, Olayemi Cardoso, said.


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He said the MPC decision to hike the parameters was part of efforts to combat the country’s rising inflationary rate, which was pegged at 31.70 per cent in February, and the members believed a hike in the cost of food primarily triggered the headline inflation in the country.

“The committee, therefore, was of the view that addressing food insecurity is key to containing the current inflationary pressures,” Cardoso added.

Commenting on the recent MPR hike, an economic consultant, Orji Udemezue, said it was challenging for manufacturers and businesses to borrow from merchant banks.

“I’m a chartered banker, and my concern is while we fight inflation, we don’t need to destroy the economy. No nation can move forward with the rate hike. What you’re practically saying is to stop banks from lending because of the huge cost of lending.

“The cost of borrowing is much more challenging right now. It’s more like businesses and manufacturers are being told to hold off till the CBN finishes fighting inflation.

“No economy grows without entrepreneurship. Even some of us with our experience in banking, it is difficult to borrow now from the banks,” he said.

According to Udemezue, the asymmetric corridor is to make sense of the need to mop up more money.






     

     

    “Instead of +100-700, they’re now doing +100-300. It means that if today you’re trying to borrow money from the Central Bank as the lender of last resort, they will lend to you at a maximum 26 per cent interest rate,” he added.

    While reacting to the development, the Chief Executive Officer (CEO) of CFG Advisory, Tilewa Adebayo, said the CBN was gradually enforcing economic restructuring while urging that the fiscal authority complement the CBN efforts.

    “The leading and lagging indicators influenced the rate hikes we have today. However, we would keep watching and seeing the reactions; maybe they would start to hold. The policies from the fiscal side also need to complement the efforts of the CBN,” Adebayo said.

    The CBN uses the MPC meeting to make critical decisions on the country’s economy.

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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