The Central Bank of Nigeria (CBN) has announced an increase in the Monetary Policy Rate (MPR) to 27.50%, up from 27.25%, as part of ongoing efforts to curb rising inflation in the country. This decision was reached during the final meeting of the Monetary Policy Committee (MPC) for 2024, held at the CBN headquarters in Abuja.
CBN Governor Yemi Cardoso disclosed the unanimous decision of the MPC to raise the MPR by 25 basis points. The move is the latest in a series of monetary policy adjustments aimed at addressing persistent inflationary pressures in Nigeria.
Governor Cardoso outlined the key resolutions made by the MPC:
- Increase in Monetary Policy Rate:
The MPR, which serves as the benchmark interest rate, was raised from 27.25% to 27.50%. - Retention of the Cash Reserve Ratio (CRR):
The CRR remains at 50% for Deposit Money Banks and 16% for Merchant Banks. - Unchanged Liquidity Ratio (LR):
The Liquidity Ratio stays at 30%, maintaining stability in the banking system. - Asymmetric Corridor:
The corridor around the MPR was retained at +500/-100 basis points.
Cardoso emphasized that these decisions were made against the backdrop of renewed inflationary pressures observed in October 2024. He noted that both headline and core inflation measures had increased year-on-year, prompting the need for decisive action to stabilize prices.
The MPC’s decision reflects growing concerns about Nigeria’s inflationary trends. According to the National Bureau of Statistics (NBS), inflation surged to 33.88% in October 2024, up from 32.7% in September.
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This represents a month-on-month increase of 1.18 percentage points and a year-on-year rise of 6.55 percentage points compared to October 2023, when inflation stood at 27.33%.
The NBS attributed the rising inflation to higher transportation costs and escalating food prices, driven by supply chain disruptions and increasing production costs. The Consumer Price Index (CPI) for October underscored the urgency of measures to address these economic challenges.
The recent increase marks the sixth time the CBN has raised the MPR since February 2024. The most recent adjustment occurred in September when the rate was raised to 27.25% following a brief period of declining inflation in August. However, with inflationary pressures resuming, the MPC decided to take a proactive stance to mitigate further economic instability.
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The Monetary Policy Rate is a critical tool used by the CBN to influence borrowing and lending rates across the economy. By raising the MPR, the apex bank signals its intent to tighten monetary policy, making borrowing more expensive and reducing excess liquidity in the market. This, in turn, can help control inflation by curbing demand.
However, higher interest rates also pose challenges, particularly for businesses and consumers. Companies may face increased borrowing costs, which can affect investment and growth. Similarly, consumers may find loans and mortgages more expensive, potentially reducing spending power.
Governor Cardoso reiterated the MPC’s commitment to addressing inflationary pressures while balancing the need for economic growth. “The Committee was unanimous in its agreement to raise the monetary policy rate by 25 basis points to 27.50 percent,” he stated.
Cardoso also noted that the CBN would continue monitoring economic indicators to determine the effectiveness of its monetary policies and make further adjustments if necessary.
As inflation remains a pressing concern, the CBN’s monetary policy actions highlight the challenges of stabilizing Nigeria’s economy. With inflation rates at multi-year highs, maintaining economic stability while fostering growth will require a careful balance of fiscal and monetary policies.
Stakeholders, including businesses, investors, and consumers, will closely watch the impact of these measures on inflation, borrowing costs, and overall economic performance in the coming months.
For now, the CBN’s decision to raise the MPR underscores its resolve to tackle inflation head-on, ensuring price stability and sustainable economic growth in the long term.