CBN has raised Monetary Policy Rate to 18% citing subsidy removal.
NewsOnline reports that the monetary policy committee of the Central Bank of Nigeria has voted in its February 2023 meeting to raise its monetary policy rate (MPR) to 18% from 17.5%, representing a 50 basis points increase.
This was announced by the governor of the central bank, Godwin Emefiele at a press briefing following the end of the second monetary policy committee meeting for the year held on Tuesday 21st, 2023.
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This is the second interest rate hike in 2023 suggesting the apex bank is continuing with the hawkish rate policy started in the second half of 2022.
The decision of the CBN is made on the back of the rising inflation rate in the economy. Headline inflation rose to 21.91% in February 2023 from 21.82% recorded in the previous month, representing its highest level since September 2005.
Highlights of the Committee’s decision
- Increase MPR by 50 basis points to 18%
- The asymmetric corridor of +100/-700 basis points around the MPR was retained CRR was retained at 32.5% While the Liquidity Ratio was also kept at 30%
- Addressing the fears of the effect of the hawkish stance on the banking industry, the CBN governor noted the bank’s stringent micro and macro-prudential guidelines have ensured that the stability and sustenance of the banking system are not at risk despite the hawkish stance.
Why the CBN raised interest rates
Central Bank Governor cited factors such as the planned fuel subsidy removal as the major reason why it needs to tighten.
- “Whether we like it or not subsidy removal will likely be removed before the end of this administration in May”
- “To reduce the gap in negative real rates we will continue to tighten but more moderately.”
Mr. Emefiele also mentioned that inflation tightening will be the strategy going forward however, it will be done moderately with one eye on the current effects of rate hikes in Europe and the US where banks are already citing it as a reason for failure.
The CBN Governor however continued to state that Nigerian banks are healthy.
….this is a developing story.
