CBN Raises Interest Rate to 14% as Inflation Hits 18.6%
The Monetary Policy Committee of the Central Bank of Nigeria has increase the benchmark interest rate (monetary policy rate) from 13% to 14%.
This was disclosed by the Governor of the CBN, Godwin Emefiele, while reading the communique of the first monetary policy committee meeting of the year, on Tuesday.
The monetary policy rate (MPR) is the baseline interest rate in an economy, every other interest rate used within an economy is built on it.
Being the the second hawkish move by the apex bank in 2022 following the rising rate of inflation, the apex bank boss says the hike in interest rate would help tame rising inflation.
The Central Bank during its last MPC meeting had increased the interest rate from 11.5% to 13.5% in May 2022, however with inflation rate still spiking above 18%, the CBN has raised the rate further to 14% in a bid to combat the rising cost of goods and services.
In his remarks during the recent MPC retreat in Lagos on Monday, Emefiele outlined the factors that would determine the rate-setting body’s decision in regards to boosting economic growth and taming inflation.
In tune with the strategic focus of the apex bank, Emefiele also disclosed that the MPC will chart a new course for an improved monetary policy and CBN that will provide direction for monetary policy in Nigeria..
The retreat had “Monetary Policy Implementation in a Digitally-Evolving Developing Economy’’, as its theme.
Mr Emefiele said that technology and innovation was playing a major role in output growth and economic development in Nigeria, hence the need to explore new ways of adapting monetary policy tools to improve the contribution of technology and innovations to the growth equation.
He added that monetary policy had been severely challenged, as its policy space narrowed significantly, in some cases, paradoxically and necessitating the need to rethink monetary policy in the context of emerging challenges and economic transformation.
In June 2022, Nigeria’s inflation rate reached a five-year high of 18.6%, up from 17.71% in the previous month, largely due to the surge in energy prices and transportation costs.