The Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR) to 18.75% from 18.5% in a move allegedly aimed at reducing inflation. The decision was made by the CBN’s Monetary Policy Committee (MPC) on Tuesday, July 25, 2023, following a meeting in Abuja. Nigeria’s inflation rate increased to 22.79% for the sixth time in 2023 in June. This marks the first decision of the monetary committee following President Bola Tinubu’s inauguration on May 29, 2023. The MPR is the benchmark interest rate in Nigeria, and it affects the cost of borrowing for businesses and individuals. The Monetary Policy Committee meeting was chaired by the acting CBN Governor, Folashodun Adebisi Shonubi.
According to Shonubi, eleven members of the committee were present during the meeting. Inflation in Nigeria rose to 22.79% in June 2023. The main drivers of inflation are rising food prices and the depreciation of the naira. At the previous Monetary Policy Committee meeting under former CBN governor Godwin Emefiele, interest rates were raised from 18.0 percent to 18.5 percent. However, prices have remained high. Shonubi pointed out that the removal of subsidies and the unification of the exchange rate in the local market contributed to the recent uptick in inflation.
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He acknowledged the existence of foreign exchange pressures, leading to economic uncertainties. The Acting CBN Governor forecasted that the economy would continue to recover at an estimated 2.66 rate. According to the CBN boss, 6 members voted to raise MPR, while 5 voted to hold rates. Additionally, they decided to reduce the asymmetric corridor from +100 to -700 basis points around the MPR, currently at 18.75.