The Central Bank of Nigeria’s Monetary Policy Committee (MPC) has announced a significant increase in the benchmark lending rate, raising it to 27.65 percent. This decision was revealed by CBN Governor Olayemi Cardoso following the 296th MPC meeting held in Abuja on Tuesday.
The MPC has consistently adopted a stringent approach to control inflation since resuming its meetings earlier this year. This latest rate hike marks an increase of over 500 basis points from the previous rate of 26.25 percent set in May.
The aggressive monetary tightening reflects ongoing concerns over inflation, which surged to 34.19 percent in June, according to the National Bureau of Statistics.
The inflation rate has risen steadily, up by 0.24 percent from May’s rate of 33.95 percent. On a year-on-year basis, the June 2024 headline inflation rate was 11.40 percentage points higher than the 22.79 percent recorded in June 2023.
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Furthermore, the month-on-month inflation rate for June 2024 increased to 2.31 percent, up from 2.14 percent in May, indicating a higher rate of price level increases.
Governor Cardoso and the MPC members have reiterated their commitment to achieving price stability and have signaled their readiness to continue tightening monetary policy until inflation is effectively managed.
Prior to this announcement, various investment reports had anticipated a hike in the Monetary Policy Rate (MPR). Cowry Asset Management, in its weekly report, projected a 25 to 50 basis point increase.
Meanwhile, Meristem’s report suggested a potential rise of 100 basis points to 27.25 percent, while keeping other parameters steady. These projections highlighted the committee’s focus on controlling inflation and maintaining capital inflows to support a stable exchange rate system.
As the CBN continues its efforts to stabilize the economy, the recent rate hike underscores the urgent need to address inflationary pressures and reinforce economic stability.