The Central Bank of Nigeria (CBN) on Tuesday raised the interest rate to 22.75 per cent amid soaring inflation.
This represents 400 basis points from the current 18.75 per cent.
Recall that at the last meeting in July 2023, the MPC, headed by the former acting governor of the apex bank, Mr Folashodun Shonubi, increased the monetary policy rate by 25 basis points to 18.75 per cent, from 18.5 per cent in May last year.
Addressing journalists at the end of the two-day meeting in Abuja, Cardoso said the committee voted to adjust the asymmetric corridor around the MPR to +100 to -700 from plus 100 to -300 basis points and raised the cash reserve ratio from 32.5 percent to 45 percent
He said the MPC voted to keep the cash reserve ratio at 45 per cent while the liquidity ratio was retained at 30 per cent.
He said the committee recognised the need to continue to put in place measures to boost investor confidence and attract capital inflows.
“To this end, the committee will continue to monitor developments in the global and domestic economies to ensure that inflationary and exchange rate pressures moderate in the near term,” he said.
He said the committee identified non-monetary factors driving inflation such as persisting insecurity and infrastructure deficits and noted the role of fiscal policy in addressing these shortfalls while reiterating the commitment of monetary policy support.
“In this regard, the committee applauded fiscal policy initiatives towards reducing the cost of living for ordinary Nigerians including the ongoing efforts to increase food supply and provide mass transit CNG buses to ease the cost of transportation and the civil service reforms to improve the efficiency of government amongst others”.
Commenting on the development, a former deputy governor of the CBN, Mr Kingsley Moghalu backed Cardoso for raising the interest rate.
“Correct move by @cenbank Monetary Policy Committee to dramatically hike the Monetary Policy Rate by 400 basis point to 22.5 %. The situation calls for nothing less if we are to check inflation over 12-18 months. We did the same a decade ago to bring inflation from 14% to 8%.
“It will hit businesses hard, but inflation is hitting harder. We must slay the inflation dragon lest it consumes our economy and we head to Zimbabwe/Venezuela. The money supply MUST be reduced. Price stability must take priority before economic growth in the current situation,” Moghalu said.
