The Monetary Policy Rate was raised by the Central Bank of Nigeria to 15% on Tuesday.
The Minimum Rediscounted Rate (MRR), which the CBN held at 15% until August 17, 2003, is now at its greatest level.
Up until the CBN announced a new monetary policy framework in 2006, which replaced the MRR with the Monetary Policy Rate, the MRR was the rate adopted by the CBN (MPR).
At the 287th Monetary Policy Meeting, CBN Governor Godwin Emefiele stated that “the decision was a move to save the naira and reduce inflation.”
The rate increase was approved by all of the members.
In 2009, the benchmark loan rate was as low as six percent.
The MPC decreased the MPR by 100 basis points, from 12.5 to 11.5 percent, when Covid-19 struck in 2020.
But in May and July 2022, respectively, this was raised to 13% and then by another 100 basis points to 14%.
The CBN’s action was intended to stop the rising inflation, which has persisted despite the rate hike.
According to the National Bureau of Statistics Consumer Price Index for August 2022, Nigeria’s inflation rate is currently 20.52%.
The lack of foreign currency has caused the naira, which is currently worth about N720 on the black market and N431.8 at CBN rates, to devalue. Lack of foreign currency is a major driver of boosting costs.
The head of the central bank stated during the meeting that rising energy prices and power rates were driving up inflation.
He claims that the rising US interest rates have also put pressure on the naira and driven foreign investors away from the Nigerian market.
According to Emefiele, the overall picture is still clouded by the negative effects of the Ukraine war and COVID-19.
Because of the increasing demand for money brought on by the general election in 2023, he predicted that the Nigerian economy will expand but at a “more reduced rate.”
He considered the increase in inflation over the previous four months to be concerning.
According to the CBN governor, easing inflation will worsen both the economic situation in Nigeria and the depreciation of the naira.
A firm stance on policy, he claimed, would help people value the naira.