Inflation Forces CBN To Tighten Liquidity As MPC Raises Interest Rate To 16.5%

The Central Bank of Nigeria (CBN) on Tuesday after the two day Monetary Policy Committee meeting in Abuja, raised its benchmark interest rate, known as Monetary Policy Rate (MPR) by 100 basis points to 16.5 percent, the fourth straight hike this year.

This was in consideration of the persistent rise in inflation rate and fragile growth.

Nigeria’s headline inflation accelerated to the highest level in 17 years to 21.09 percent in October 2022, from 20.77 percent in the previous month.

The CBN had in the last few months increased its monetary policy stance by a combined 400 basis points to rein in inflation.

In its meeting in May 2022, the CBN raised its benchmark interest rate by 150 basis points to 13 percent, the first time in six years.

In July 2022, Africa’s most populous country’s big bank also increased its interest rate by 100 basis points to 14 percent and in September to 15.5 percent by 50 basis points.

After the meeting, MPC members unanimously voted to retain other parameters.

Consequently the CBN retained the Asymmetric Corridor of +100/-700 basis points around the MPR; retained the CRR at 32.5 per cent; and the Liquidity Ratio at 30 per cent.

Godwin Emefiele, governor of the CBN, who announced the decision after the meeting said, “the MPC noted with concern the continued aggressive movement in inflation, even after the three consecutive rate hike at its previous meetings.

“He expressed its unrelenting resolve to restore price stability while providing the necessary support to strengthen the fragile recovery.”

-diplomatic diary