The Central Bank of Nigeria has surprisingly raised the monetary policy rate to 27.75 per cent despite warning from experts.
The CBN governor, Olayemi Cardoso, made the disclosure on Tuesday at the 297th meeting of the bank.
The decision was taken by 11 members present at the meeting, according to Cardoso.
The bank’s MPC members unanimously agreed to raise the MPR by 50 basis points to raise the benchmark interest rate from 26.25 per cent to 27.25 per cent.
The bank retained the asymmetric corridor around the MPR to +500/-100 basis points.
The committee also raised the cash reserve ratio of deposit money banks by 500 basis points to 50 per cent from 45 per cent and merchant banks by 200 basis points to 16 per cent from 14 per cent.
At the July meeting, the bank raised the MPR by 50 basis points to 26.75 per cent from 26.25 per cent and adjusted the asymmetric corridor around the MPR to +500/-100 from +100/-300 basis points.
“The committee was unanimous in its decision to further tighten policy,” Cardoso explained.
Cardoso said the committee noted the moderation in headline inflation in July and August and the stability in the foreign exchange market.
He said the committee, “Unanimously recognized that a lot more is required to actualize the bank’s price stability mandate.”
Cardoso said inflation remains concerning to members of the MPC adding that there was a need to address an upward trend of energy prices.
Professor Uche Uwaleke, financial economist and Director at the Institute of Capital Market Studies, Nasarawa State University had warned against further MPR hike as it is stiffing investments.
“Given the easing inflation in July and August, the MPC should completely pause rate hikes,” Uwaleke said.
The Manufacturers Association of Nigeria (MAN) has also lamented that the average maximum lending rate charged by commercial banks on loans to its members rose to 35 per cent in Q2 of 2024, up from 28.6 per cent in Q1.
The association made the disclosure in a report, “MAN Position on the Incessant Increase in Interest Rate,” published in its Q2’24 “MAN CEO’s Confidence Index (MCCI).”
MAN said, “The continuous hikes in MPR have tightened financial conditions for the productive sector, with the average maximum lending rate charged by commercial banks on manufacturers’ finances rising to 35 per cent in Q2 2024 from 28.6 per cent in Q1 2024.
“This has not only increased the cost of goods but has also further compounded the inflationary problem and threatened employment in the sector.”