As predicted by economic analysts, the monetary policy committee of the Central Bank of Nigeria (CBN) on Tuesday sustained its hawkish measure, raising the Monetary Policy Rate (MPR), the benchmark lending rate from 24.75% to 26.25% at the end of its 295th meeting in Abuja.
The apex bank governor Olayemi Cardoso, who briefed the media on the key decisions taken by the committee at the meeting, said the committee retained the asymmetric corridor at +100 basis points and -300 basis points around the MPR.
This is even as he confirmed that the MPC also retained the cash reserve ratio (CRR) at 45% for deposit money banks (DMBs) and 14% for merchant banks and the liquidity ratio (LR) was left unchanged at 30%.
The CBN governor said the reason for the hike was to tighten inflation, noting that the hawkish monetary stance of the apex bank is achieving the desired results in the economy.
He explained: “Following an extensive review of risks and the near-term inflation outlook, the balance of risks suggests further tightening of policy to build on the benefits accrue from previous rate hikes.”
Cardoso said the key focus of MPC at the meeting was to achieve price stability by effectively using tools available to the monetary authority to rein inflation.
Citing the last inflation report from the National Bureau of Statistics (NBS) which indicated a rise in the inflation rate to 33.69% in April to justify the committee’s decision, the CBN governor said the efforts by the committee to reduce inflation were having an effect.
The banker clarified: “In terms of looking at the inflationary figure over the past year, inflation is indeed getting more and more of an issue and frankly, the need to moderate that by saying that any kind of inflation in my view is an issue.
“However, I think there is light at the end of the tunnel, and that is because as much as we see an increase in the inflationary figures when you go down to the specifics in terms of food, core and headline, you’ll see that it is moderating and decelerating in increment, and that’s the good news.
“Because for the first time, since October we’ve seen a relatively significant moderation in the rate of increase on the news components of inflation that I was talking about. I believe very strongly that the tools that the central bank is using are working.
“I’ve said several times, and I will say it again, there’s no magic wand. These are things that need to take their own time. They pass through and the effect of the measures in advanced countries, in developing countries, they do take time”, Cardoso added.
The apex bank governor, who expressed confidence that the figures showed that Nigerians were beginning to get some reliefs, said he was optimistic that in another couple of months, there would be more positive outcomes of what CBN has been doing.
The Tuesday’s decision of the MPC was the third consecutive time the apex bank would be raising the benchmark rate this year and the 11 consecutive times since May 2022 in a bid to rein inflation.
