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Against projections, CBN raises interest rate to 17.5%

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Against projections by some experts, the Monetary Policy Committee (MPC) of Central Bank of Nigeria (CBN) has increased the monetary policy rate by 100 basis points to 17.5 per cent.

This is contained in a communiqué issued at the end of the first MPC meeting in 2023, in Abuja on Tuesday.

CBN Governor, Mr Godwin Emefiele, who read the communiqué said that the previous increases had yielded results, with the slight drop in the inflation rate recorded in December 2022.

Our correspondent reports that the committee, however, held all other parameters constant.

While the Assymetric Corridor of +100/-700 basis points around the MPR was retained, the Liquidity Ratio of 30 per cent and the Cash Reserve Ratio (CRR) of 32.5 per cent were also retained.

It was also reported that the MPR had witnessed four consecutive increases, from 11.5 per cent in early 2022 to 16.5 in November 2022.

According to Emefiele, the committee deliberated on whether to hike rates further or hold on to examine the impact of the past increases.

“The options considered were primarily to hold the rate or tighten it further to consolidate the previous gains.

“However, the MPC noted that loosening the rate would gravely undermine the gains of the last four increases, hence the hike in rate,” he said.

Our correspondent reports that some financial experts had projected that the apex bank would most likely retain the previous rates.

According Umhe Uwaleke, a Professor of Capital Market at the Nasarawa State University, Keffi, increasing the MPR can jeopardise economic growth.

Uwaleke said that the MPC was likely to hold all the existing parameters for two reasons.

“One, historical evidence suggests that the MPC seldom adjusts policy rates in January, due to the need to allow the markets to stabilise in the new year.

“Secondly, inflationary pressure is beginning to reduce as seen in headline inflation numbers for December 2022, not only in Nigeria but also in the United States of America.

“I do not advise a further hike in MPR, as doing so beyond the current high rate of 16.5 per cent is capable of jeopardising economic growth,” he said.

An economist, Dr Tope Fasua, urged the CBN to shun temptation to further increase the rates.

thisday newspaper

Kadiri Abdulrahman

NEWSVERGE, published by The Verge Communications is an online community of international news portal and social advocates dedicated to bringing you commentaries, features, news reports from a Nigerian-African perspective. A unique organization, founded in the spirit of Article 19 of the Universal Declaration of Human Rights, comprising of ordinary people with an overriding commitment to seeking the truth and publishing it without fear or favour. The Verge Communications is fully registered with the Corporate Affairs Commission of the Federal Republic of Nigeria as a corporate organization.

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