UPDATE: Why we Increased Interest Rate to 18 Percent – CBN

The Central Bank of Nigeria (CBN) on Tuesday increased Monetary Policy Rate (MPR) which measures interest rate by 50 basis points to 18 percent to rein in inflationary pressure.

This is one of the decisions taken during the Monetary Policy Committee (MPC) meeting of the CBN held on Monday and Tuesday.

While the apex bank increased MPR by 50 basis points around asymmetric corridor of -100/+70 , it left Cash Reserves Requirement (CRR) and liquidity unchanged at 32.5 percent and 30 percent respectively.

Briefing journalists after the meeting, CBN governor, Godwin Emefiele, expressed hope in the deceleration of inflation rate.

Also Read: BREAKING: CBN Increases Interest Rate to 18 Percent, Says Nigeria Banks Healthy 

Emefiele said CBN adopted moderate tightening to achieve a level of reduction in inflation as against adopting aggressive tightening that will impact negatively on banking and financial system.

According to the CBN governor, while the bank was keen to reduce inflation, it was careful not do it in a way it will upset the economy.

“The rate of acceleration or increase in inflation has slowed down because of the tightening measures adopted by the CBN.

“The MPC was convinced that the tightening measures have started to reduce the rate of increase in inflation. We believe that as we continue this process, inflation will begin to trend down,” he said.

Asked if inflation could be reduced to single digit level by May this year, Emefiele said it will be an impossible task to achieve given federal government’s plan to end fuel subsidy.

“Whether we like it or not, before the end of this administration, we expect that petrol subsidy will disappear. Subsidy removal has its own implications on inflation. MPC feels that we need to continue tightening. The committee is not optimistic that prices are going to come down because of these measures so they feel that we continue to tighten; that is what we did at this meeting. The important thing is for us to continue to look at what the margin is between policy rate and inflation,” he added.