The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) concluded its 149th meeting on Tuesday with a resolution to raise the lending rate from 18.5 percent to 18.75 percent in order to reduce the country’s current inflation rate of 22.79 percent.
The committee also changed the asymmetric corridor around the Monetary Policy Rate (MPR) from +100/-700 to +100/-300 basis points. It kept the Cash Reserve Ratio (CRR) at 32.5 percent and the liquidity ratio at 30%.
The interim CBN Governor, Folashodun Shonubi, stated at a post-MPC meeting that 11 members participated.
Shonubi began unwinding some of Godwin Emefiele’s unconventional monetary measures in June.
Despite the increase in lending rates, there are concerns that inflation has continued to rise.
Shonubi noted that despite extensive efforts to stabilize the markets, inflationary prices remained high in the majority of countries.
However, he pointed out that the increase in lending rates has helped to regulate inflation because, in the absence of monetary policy action, inflation could have been worse than it is now.
The apex bank will use every available tool to control inflation, he continued.
Regarding the new policy to float the naira, he asserted that the current volatility will soon diminish as the CBN handles the backlog of foreign exchange requests.
Shonubi added that the amount of external reserves has increased to $33.97 billion despite the continued weakness of external reserve accretion.
Nigeria’s first professor of capital markets, Uche Uwaleke, commented on the CBN’s actions, saying the tepid increase in lending rate by just 25 points to 18.75% is an admission that there is not much the CBN can do to control supply-side-induced inflation via the policy rate.