By Adedapo Adesanya
The Central Bank of Nigeria (CBN) has raised the monetary policy rate by 25 basis points to 27.50 per cent to further tackle rising inflation in Nigeria.
This was disclosed by the Governor of the apex bank, Mr Yemi Cardoso, at the end of the 298th Monetary Policy Committee (MPC) meeting in Abuja.
This is the sixth time that the country has hiked interest rate this year after it announced a 50-basis-point that brought the previous rate to 27.25 per cent in September 2024.
The rationale for increasing interest rates is that higher interest rates increase the cost of borrowing for individuals and businesses. This creates a ripple effect that reduces loans spent on items like homes, cars, and investments and curbs overall spending in the economy.
Normally, low interest rates can lead to excessive borrowing and investments in assets that will then inflate their prices.
Also, increased interest rates make saving more attractive as depositors earn more on their savings. It is widely accepted that saving reduces the demand for goods and services and thus helps to stabilise prices.
Mr Cardoso also used the opportunity to reiterate that the CBN will continue to employ necessary means to bring down inflation.
He projected that Nigeria’s high inflation should moderate by the end of the first quarter of 2025.
The inflation rate continued its upward trend in October 2024, impacted by rises in the price of food, electricity, and fuels, as it came in at 33.88 per cent, relative to the September 2024 headline inflation rate of 32.70 per cent.