No Succour Yet As CBN Hikes Interest Rate To 27.50%

BY EDMOND ODOK – As predicted by some financial experts, the Central Bank of Nigeria (CBN) has again raised the Monetary Policy Rate (MPR) to 27.50 percent from the existing 27.25 percent.

The latest decision represents the fifth time the Apex Bank has increased the interest rate this year, resulting in a cumulative increase of 875 basis points.

The CBN Governor, Mr Olayemi Cardoso, said the decision to further hike the rate was that of 11 of the 12 members present at the meeting, making it a consecutive tightening of the rate since he took charge as CBN governor and MPC’s Chairman.

Rising from its 154th Monetary Policy Committee (MPC) meeting in Abuja on Tuesday, Cardoso explained that the meeting also decided to retain the Cash Reserve Ratio (CRR) at 50 percent for Deposit Money Banks and 16% for Merchant Banks.

According to Cardoso; “The Committee was unanimous in its agreement to raise the monetary policy rate by 25 basis points to 27.50 percent”, adding that the Committee retained the Liquidity Ratio (LR) at 30 percent and Asymmetric Corridor at +500/-100 basis points around the MPR.

He further stated thus; “The considerations of the meeting were held on the backdrop of renewed inflationary pressures as the headline food and core measures rose year on year in October 2024. Members, therefore, agreed unanimously to remain focused on addressing price developments”

The CBN boss said the MPC noted that food prices remain a key contributor to the uptick, and lauded the Federal Government’s efforts at improved security, especially in the North-East region, which would likely improve food production.

Similarly, the MPC noted the role of rising energy prices on the general price level due to its impact on factors of production, stressing that the recent increase in the price of Premium Motor Spirit (petrol) has also impacted the cost of production and distribution of food items and manufactured costs.

However, the Committee is hopeful that the full deregulation of the petroleum industry’s downstream sub-sector would eliminate scarcity and stabilize price levels in the short to medium term.

During its September 2024 MPC meeting, the CBN moved the MPR by 50 basis points to 27.25 percent from 26.75 percent, while retaining the asymmetric corridor of +500/-100 basis points.