The Central Bank of Nigeria (CBN) has increased the interest rate by 50 basis points to 27.25 percent, marking the fifth hike since February 2024. This was announced by CBN Governor Olayemi Cardoso during a press briefing following the 297th Monetary Policy Committee (MPC) meeting in Abuja on Tuesday.
Cardoso also revealed that the Cash Reserve Ratio (CRR) for Deposit Money Banks (DMBs) had been raised by 50 basis points, from 45 percent to 50 percent, while the CRR for Merchant Banks was increased from 14 percent to 16 percent. Meanwhile, the committee retained the Liquidity Ratio (LR) at 30 percent and the Asymmetric Corridor at +500/-100 basis points around the Monetary Policy Rate (MPR).
These adjustments come as Nigeria’s inflation rate showed signs of easing for the second consecutive month, dropping to 32.15 percent in August, according to the National Bureau of Statistics (NBS). This follows the MPC’s decision in July 2024 to raise the interest rate to 26.75 percent.
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Notably, this rate hike by the CBN comes just five days after the United States Federal Reserve cut its interest rate by 0.5 percent for the first time since July 2023.
Muda Yusuf, an economist and Executive Director of the Centre for the Promotion of Private Enterprise, had previously urged the CBN to halt its continuous interest rate increases. Despite these calls, the CBN has maintained its tightening stance, raising the interest rate four times since February 2024, from 22.75 percent to 26.75 percent. Before Governor Cardoso’s appointment in September 2023, Nigeria’s interest rate stood at 18.75 percent.
The consistent hikes underscore the CBN’s efforts to manage inflation and stabilize the economy amidst ongoing global economic challenges.
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