The Monetary Policy Committee, MPC, of the Central Bank of Nigeria, CBN, has raised the benchmark interest rate from 14 to 15.5 per cent in order to tame the rising inflation rate.
This represents a 150-basis-point bps, increase from the 14 per cent rate voted during the last MPC meeting in July.
At the end of the MPC meeting on Tuesday, CBN Governor, Godwin Emefiele, said 10 members voted in favour of the rate hike.
Inflation exceeded the 20 per cent mark in August, fuelling speculations that the CBN would further raise the rate.
The cash reserve ratio, which means the share of a bank’s total customer deposit kept with the central bank as cash, was also raised to 32.5 per cent from 27.5 per cent. It, however, retained the liquidity.
Oriental News Nigeria reports that the hike which was above market expectations of 14.5 per cent marks the third straight rate increase so far this year, bringing borrowing costs to the highest since 2006, amid heightened concerns over the impact of sustained inflationary pressures on the country’s fragile recovery.
Nigeria’s annual inflation rate climbed for the seventh straight month to a 17-year high of 20.5 per cent in August, amid soaring food prices, higher diesel costs and continued currency weakness due to a chronic dollar shortage.
Meanwhile, the economy of Nigeria advanced by a stronger-than-expected 3.54 per cent from a year ago in the second quarter of 2022, solely driven by the non-oil sector.
The bank revised growth projections to 3.5 per cent this year, compared with the forecast of 3.3 per.
Looking forward, Emefiele warned about the possibility of more rate hikes if inflation continued to trend higher