The Central Bank of Nigeria’s CBN, Monetary Policy Committee, MPC, lifted its benchmark monetary policy lending rate by 50 basis points to 18 per cent.
The Bank is poised to tightening policy to rein in inflation which has squeezed consumer purchasing power.
The latest rate hike came after last week’s inflation data showed price rises quickened in February despite the recent cashless policy meant to reduce the amount of currency in circulation. Inflation also rose in January, the Central Bank of Nigeria Governor Godwin Emefiele said
“Members, however, remained aware of the ongoing challenges associated with the limits imposed on cash withdrawals in the face of frequent downtime in bank electronic transaction channels. The Committee thus called on Other Depository Corporations, online payment platforms, and other stakeholders to ensure that the prevailing incidence of network failures is overcome in the immediate and short term.
This would ensure that the Naira Redesign and Cash Withdrawal Limit Policies lead to an improved in-road of the CBN Cashless program and efficiency of the transmission mechanism of monetary policy.
“Members, thus, resolved by a majority vote to raise the Monetary Policy Rate (MPR) by 50 basis points. In Summary, ten (10) members voted to raise the MPR by 50 basis points, one (1) member voted to raise the MPR by 25 basis points and one (1) member voted to hold the MPR. All members voted to keep all other parameters constant. The MPC, therefore, voted to: Raise the MPR by 50 basis points to 18.0 per cent; Retain the asymmetric corridor of +100/-700 basis points around the MPR; Retain the CRR at 32.5 per cent; and Retain the Liquidity Ratio at 30 per cent.
The Asymmetric Corridor of +100/-500 basis points around the MPR, the Liquidity Ratio of 30 per cent and Cash Reserve Ratio (CRR) of 32.5 cent were thus retained.
According to Emefiele, the committee debated whether to continue the rate hike to further check inflation.
He said that the MPC also considered whether to hold the rate to observe emerging developments and allow for the impact of the last five rate hikes to permeate the economy.
“Loosening in the view of the committee members would undermine gains so far achieved
“MPC observed the upward risk to price development and expectations of the removal of the Premium Motor Spirit (PMS) subsidy.
“These, in the view of members, provide a compelling argument for an upward adjustment of policy rate, albeit less aggressively, ” he said.
He also said that the apex bank’s Naira redesign and cash withdrawal policies had resulted to a sizeable reduction in currency outside the banking system.
According to him, that is an indication of improvement in the potency of monetary policy tools of the CBN.