Despite sustained clamour by business owners in the country for a dovish monetary policy regime, the Central Bank of Nigeria (CBN) on Tuesday sustained its hawkish policy regime by raising the Monetary Policy Rate (MPR) by 50 basis points (bps) to 26.75 percent
The latest upward adjustment of the benchmark lending rate by the apex bank, which was announced by the CBN governor, Olayemi Cardoso, was part of the key decisions taken by its Monetary Policy Committee (MPC) at the end of its 2-day meeting on Tuesday in Abuja.
In addition to raising the MPR, the committee members also adjusted the asymmetric corridor from +100/-300 to +500/-100 around the MPR but retained the CRR at 45.00% and held the liquidity ratio constant at 30.00%.
Briefing journalists on the decisions taken by the MPC at the end of its meeting, Cardoso said the committee members voted to hike the rate by 50 basis points to 26.75 percent, adjust the asymmetric corridor to +500 and -100 basis points around the MPR, adding that it also retained the cash reserve ratio (CRR) at 45 percent, and liquidity ratio at 30 percent.
The CBN governor explained that the committee was conscious of the impacts of rising prices on households and businesses, and was determined to take necessary measures to bring inflation under control.
He expatiated: “The committee re-emphasized its commitment to the bank’s price stability mandate, and remained optimistic that despite the June 2024 uptick in headline inflation, prices are expected to moderate in the near term,” Cardoso said.
“This is hinged on monetary policy, gaining further traction in addition to recent measures by the fiscal authority to address food inflation.
“In its consideration, the committee noted the persistence of food inflation, which continues to undermine price stability.
“It was observed that while monetary policy has been moderating aggregate demand, rising food and energy costs continue to exert upward pressure on prices development.
“Prevailing insecurity in food producing areas and high cost of transportation of farm produce are also contributing to this trend.
“Members are, therefore, not oblivious to the urgent benefits of addressing these challenges, as it will offer a sustainable solution to the persistent pressure on food prices”, Cardoso added.
Also, he disclosed that the committee advocated the need to check the activities of farmers in order to address the food supply deficit and by so doing, moderate food prices in the markets.
Barely a few hours before the MPC’s decisions, the Nigerian Association of Chambers of Commerce, Mines and Agriculture (NACCIMA) had expressed serious concern that another increase in MPR could lead to higher borrowing costs and negatively impact business growth.
Specifically, the association in a statement by its National President, Mr. Dele Oye, pointed out that though increasing the benchmark lending rate could help in mitigating the rising inflation, jacking the rate up would result in higher costs and increased uncertainty with the attendant negative implications for businesses nationwide.
The NACCIMA president clarified: “In summary, while an increase in the benchmark interest rate can help control inflation, it often introduces higher costs and increased uncertainty for businesses, which can have a range of negative impacts on their operations and growth prospects.”
