In order to tame the rising inflation rate in Nigeria, the Monetary Policy Committee of the Central Bank has raised the benchmark interest rate from 14 to 15.5 per cent.
This represents a 150-basis-point 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, told journalists that 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.
Explaining further, Emefiele said, “Our research study at Central Bank has shown us that once inflation trends above 13 per cent, it will retard growth. We have seen inflation in the last four months move so aggressively in Nigeria.
“It is difficult for us, for this MPC with all the data available, with all the research that have been conducted; it is difficult for us not to go in a very aggressive way we decided to go today.”
He added, “What we have done at this meeting is to say we will move CRR up by five per cent to a minimum of 32.5 per cent; that we will move MPR up by 150 basis point. That means over the last four months, we moved MPR up by over 400 basis point.
“But at the same time, let us not forget that inflation rate in Nigeria at 20.5 per cent is still higher than our policy rate which means we are still in the realm of negative interest rate which remains injurious to the economy.”