The Central Bank of Nigeria (CBN) has raised the Monetary Policy Rate (MPR) to 27.50%, a slight increase from the previous 27.25%, as part of measures to address Nigeria’s persistently high inflation.
The announcement came during the final Monetary Policy Committee (MPC) meeting of the year, held in Abuja on Tuesday.
The decision to adjust the rate by 25 basis points was reached unanimously by MPC members, according to CBN Governor Yemi Cardoso.
Alongside the rate hike, the Cash Reserve Ratio (CRR) was retained at 50% for Deposit Money Banks and 16% for Merchant Banks.
Speaking at the CBN headquarters, Governor Cardoso explained the rationale behind the move: “The Committee was unanimous in its agreement to raise the monetary policy rate by 25 basis points to 27.50 percent. Members also agreed to remain focused on addressing price developments.”
Inflation Pressures Escalate
The decision comes amid mounting inflationary pressures, with the National Bureau of Statistics (NBS) reporting a sharp rise in inflation to 33.88% in October 2024, up from 32.7% in September.
The month-on-month increase of 1.18 percentage points was attributed to higher transportation costs and food prices.
The NBS, in its Consumer Price Index (CPI) report, highlighted the urgency for targeted monetary interventions to curb the surging inflation.
Governor Cardoso emphasized that the latest rate hike was necessary given the persistence of these pressures, despite previous monetary tightening measures earlier in the year.
A Year of Aggressive Monetary Policy
This marks the sixth interest rate hike by the CBN in 2024, underscoring the central bank’s determination to stabilize Nigeria’s economy.
The last increase in September brought the MPR to 27.25%, responding to a temporary dip in inflation seen in August.
Economists suggest that the consistent upward adjustments reflect the bank’s resolve to rein in inflation by reducing liquidity and cooling consumer spending.
However, these measures may come at a cost to economic growth.
Economic Implications
The latest rate hike is expected to have mixed implications for Nigeria’s economy.
While the move is designed to curb inflation, it could lead to higher borrowing costs for businesses and individuals, potentially slowing economic activity.
Nonetheless, the CBN remains committed to fostering price stability and ensuring long-term economic resilience.
Looking ahead, the next MPC meeting will focus on assessing the impact of this year’s monetary policy decisions and crafting strategies for the year to come.
Chinedum Anayo