The Central Bank of Nigeria on Tuesday raised its benchmark lending rate to 16.5 percent in a sustained push to control inflation and ease pressure on the naira.
The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, made the announcement at the end of the Monetary Policy Committee meeting in Abuja. The CBN said the previous hikes were beginning to yield results and there was a need to continue tightening. It tightened by 100 basis points.
Mr. Emefiele announced that the board maintained the Cash Reserve Ratio (CRR) at 32.5 percent, and voted to maintain the asymmetric corridor at +100 to -700 basis points around the MPR. The liquidity ratio remained at 30 percent.
The cash reserve ratio is the proportion of a bank’s total customer deposits that must be held at the central bank in the form of liquid cash, while the bank’s liquidity ratio is the proportion of deposits and other assets it needs to hold for short-term liquidity. duties
Earlier this year, the CBN raised the cash reserve requirement (CRR) to a minimum of 32.5% in a bid to clear liquidity.
In October, Nigeria’s inflation rate hit a 17-year high of 21.09% as food and petrol prices soared.
The CBN has equally continued to tackle the daunting task of reducing the currency in circulation while curbing the rising cost of goods and services across the country.
As part of measures to control the money supply, the apex bank announced in October that it had redesigned all major naira notes and they will start circulating by December 2022.
The naira appreciated to N775 per dollar in the parallel section of the foreign exchange market on Monday, gaining N15 or 1.9 percent from the N790 it traded at last Friday. At the Investors and Exporters window, the naira appreciated against the dollar, trading at N445.38.
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The central bank hopes the rate hike will reduce the money supply in the economy and curb inflation, but some analysts also say the move risks slowing economic growth.
Higher interest rates will raise the cost of borrowing for businesses and could make goods and services even more expensive for consumers as the Christmas season approaches.
On Tuesday, Mr. Emefiele said global inflationary pressure was quite high and there was need to increase inflationary concerns. He added that the MPC had not considered the need to release rates due to the circumstances, although he said that previous decisions to keep rates up were beginning to yield results.
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