The Central Bank of Nigeria, on Tuesday, raised the Monetary Policy rate to 14 per cent from 13.5 per cent.
The governor of the apex bank, Godwin Emefiele, who disclosed this after the meeting of the Monetary Policy Committee held in Lagos, said the hike in interest rate would help tame rising inflation.
The new interest rate comes barely two months after the apex bank raised the interest rate to 13 per cent from 11.5 percent on May 24th, making it the second time this year.
According to Emefiele, it was the right option considering economic realities.
“The committee resolved that the most rational policy option would be to further strengthen its tightening stance in order to effectively curtail the unabated rising trend of inflation,” Emefiele said.
“Members were conscious of the fact that output growth remained fragile. However, not curtailing inflation now could erode the monetary gains achieved in improving consumer purchasing power and thus worsen the poverty level for the vulnerable populace.”
The monetary policy rate (MPR) is the main interest rate in a country or economy on which all other interest rates in that economy are based. While the apex bank increased the MPR rate, it, however, retained other parameters.
The asymmetric corridor remains +100 and -700 basis points around the MPR, and the well as Cash Reserved Ratio (CRR) at 27 percent.
Still speaking, the CBN Governor said; “Committee thus vote unanimously to raise the Monetary Policy Rate (MPR). One member voted to increase the MPR by 150 basis points, six members by 100 basis points, one member by 75 basis points and three members by 50 basis points.
“Consequently, Committee resolved to increase the MPR by 100 basis points from 13 percent to 14 percent. In summary, MPC voted as follows:
“Increase MPR to 14% from 13, retain the Asymmetric Corridor at +100 and -700 basis points around the MPR, retain the CRR at 27.5 percent and retain liquidity ratio at 30 percent.”