The monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which benchmarks interest rates, from 26.75 percent to 27.25 percent.
Olayemi Cardoso, CBN’s governor, announced the 50 basis points increase at a press conference on Tuesday after the committee’s 297th meeting in Abuja.
Cardoso said the increase was to further tame inflation.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held its 297th meeting on the 23rd and 24th of September 2024 to review recent economic and financial developments as well as assess risks to the outlook.
Eleven of the twelve members of the Committee were in attendance.
The Committee was unanimous in its decision to further tighten policy and thus decided as follows:
- Raise the MPR by 50 basis points to 27.25 per cent from 26.75 per cent.
- Retain the asymmetric corridor around the MPR at +500/-100 basis points.
- Raise the Cash Reserve Ratio of Deposit Money Banks by 500 basis points to 50.00 per cent from 45.00 per cent and Merchant Banks by 200 basis points to 16 per cent from 14 per cent.
- Retain the Liquidity Ratio at 30.00 per cent
The Committee noted the moderation in headline inflation year-on-year in July and August 2024.
In addition, the MPC noted the relative stability and convergence in the exchange rate across the various market segments, resulting from the Bank’s tight monetary policy stance. This is expected to improve confidence which will enable economic agents to plan in the medium to long term.
Cardoso said the MPC was worried about the fiscal deficits.
However, he said the Federal Government has pledged not to resort to ways and means for monetary financing.
“Members were also concerned about the growing level of fiscal deficit but acknowledged the commitment of the fiscal authority not to resort to monetary financing through ways and means,” he said.
Also, Cardoso said the committee expressed optimism that “the lifting of refined petroleum products from Dangote Petroleum Refinery will moderate transportation costs and significantly support the easing of food price pressures in the short to medium term.
“This is also expected to moderate foreign exchange demand for importation of refined petroleum products, with a positive spillover on external reserve and improvement in the overall balance of payment position.”
Cardoso also applauded the ongoing efforts of the federal government of Nigeria to bridge the supply deficit through a duty-free import window for food commodities.
