CBN raises interest rate to record 22.75%

In a bid to curb inflation and strengthen the national currency, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has announced a significant increase in the benchmark interest rate by 400 basis points to a record 22.75%.

CBN Governor, Olayemi Cardoso, revealed this decision while reading the communiqué at the conclusion of the first MPC meeting of the year on Tuesday in Abuja. The committee also voted to adjust the asymmetric corridor around the Monetary Policy Rate (MPR) and raised the cash reserve ratio.

Cardoso stated, “All 12 members of the committee decided to further tighten monetary policy by raising the MPR by 400 basis points to 22.75%. Adjust the asymmetric corridor around the MPR to +100 to -700 from plus 100 to -300 basis points. The committee also raised the cash reserve ratio from 32.5% to 45% while retaining the liquidity ratio at 30%.”

This move marks a significant departure from the last MPC meeting in July 2023 when the MPR was increased by 25 basis points to 18.75%. Since then, there has been a gradual increase in the MPR from 13% in May 2022.

The decision to raise interest rates exceeded expectations of financial experts, with analysts projecting two aggressive rate hikes within a short period to combat inflation and bolster the naira. Despite trading near its record low on the black market, the Nigerian currency’s stability remains a concern.

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President Bola Ahmed Tinubu advocated for reduced interest rates to stimulate investment and consumer spending, aiming to sustain economic growth. However, the MPC’s decision reflects a different approach prioritizing inflation control and currency stability.

The unprecedented interest rate hike underscores the CBN’s commitment to implementing stringent monetary policies to address economic challenges and restore stability in Nigeria’s financial landscape.