The Monetary Policy Committee (MPC) of the Central Bank (CBN) has increased the Monetary Policy Rate (MPR) from 16.5 percent to 17.5 percent.
The MPR is the nominal anchor rate for commercial banks to lend to their customers.
The decision was announced by Godwin Emefiele, the Governor of CBN, at a press briefing at the end of the two-day meeting of the committee in Abuja on Tuesday.
It was the first meeting of the committee in 2023. (GBN)
The action of CBN is the fifth time of raising its benchmark lending rate in a sustained push to control inflation and ease pressure on the naira.
The CBN said previous increases were beginning to yield results with the slight drop in the inflation rate recorded in December 2022.
However,it stressed that there was a need to keep tightening its fiscal policy.
The CBN keeps the asymmetric corridor at +100/-700 basis points around the MPR.
The CBN also retained the CRR at 32.5 percent while the liquidity ratio was kept at 30 percent.
The apex bank had increased the MPR from 11.5 percent earlier last year to 16.5 percent across four consecutive rate hikes in 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.
However, some analysts had projected that the apex bank would most likely retain the previous rates.
According John Agbo who expected that CBN would as it does historically, hold the rates, particularly at the beginning of the year due to the need to allow the markets to stabilise in the new year.
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Also, he posited that the fact that the inflationary pressures had started reducing not only in Nigeria but in some developed economies like the United States would have led to maintaining the status quo.
“I did not envisage a further hike in MPR, as doing so beyond the current high rate of 16.5 per cent was capable of jeopardising economic growth,” Agbo said.
Friday Ameh advised CBN to be wary of temptation to further increase t as it may be detrimental to the much needed incentives for growth.