THE Central Bank of Nigeria (CBN) has further tightened its monetary policy rate, otherwise known as the benchmark interest rate, to 27.25 per cent.
The upward adjustment shows the apex bank raised the rate by 50 basis points from 26.75 per cent in July.
The CBN Governor Olayemi Cardoso announced this on Tuesday, September 24 at the end of the two-day monetary policy committee (MPC) meeting.
He said the monetary policy committee (MPC) members unanimously raised the rate and also adjusted other parameters.
The committee raised the cash reserve ratio (CRR) by 500 basis points to 50 per cent from 45 per cent for the deposit money banks and by 200 basis points to 16 per cent from 14 per cent for merchant banks.
It retained the liquidity ratio at 30 per cent and the asymmetric corridor around the MPR at +500/-100 basis points.
“Members of the committee note that real policy rate remains negative even after the moderation in inflation,” Cardoso said.
Since May 2022, the committee has been raising rates from 11.5 per cent to control surging inflation which has risen from 17.71 per cent in May 2022 to 32.15 per cent as in August this year.
According to the apex bank, the persistent rise in food inflation and energy costs continues to undermine price stability as prevailing insecurity in food-producing areas and the high cost of transportation in farm produce are contributing to the inflation trend.
Between February and July this year, CBN raised the benchmark interest rates by 800 basis points.
In February, it raised the rate by 400 basis points to 22.75 per cent; in March, by 200 basis points to 24.75 per cent; in May, by 150 basis points to 26.25 per cent; and in July, by 50 basis points to 26.75.
The tightening of the rate has raised a lot of concerns among industry watchers as the CBN measure has yet to curb inflation, The ICIR reported.
Others have blamed it on the improper alignment of monetary and fiscal policies to lessen the sufferings of Nigerians and grow the economy.
The chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, believes CBN had overstretched its monetary policy tool on rate hikes as it had failed to relieve the burdens on businesses and the manufacturing sector.
Borrowing has become more expensive, delaying or scaling back on investments, new projects, capital improvements, growth and innovation for businesses.
The latest business activity report by Stanbic IBTC Bank shows a rapid increase in input costs, raw materials and transportation amid weakness in the Naira.
In a report, The ICIR analysed that higher interest rates discouraged lending to micro, small, and medium enterprises (MSME) across the country.
It showed that commercial banks’ maximum lending rates, at about 25 per cent at the beginning of the year, have risen to about 60 per cent as of the end of June.
This has not augur well among business associations like the Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI).
In separate statements, both associations lamented higher interest rates were negatively impacting businesses and threatening the continued operations of many ventures.
The MAN director-general, Segun Ajayi-Kadir, said high interest rates had further constrained the growth of the manufacturing sector, as the purchasing power of consumers, production levels, competitiveness, and sales faced further decline.