Inflation: CBN raises interest rate to 15.5% as Nigerians battle harsh economy

In May 2022, the MPC first raised the rate to 13 percent from 11.5. It further increased it to 14 per cent in July, before taking it to 15.5 per cent in this latest spike.

The CBN took this decision during the recently concluded monetary policy meeting as it revealed the increment represents a 150-basis points hike from the last rate - 14%.

With Nigeria's inflation figures now standing at 20.52%, the decision of the apex bank to raise the interest rate was in line with its aim of taming the rising inflation.

Among other decisions taken by the members of the MPC include increasing the MPR to 15.5 percent; keeping the asymmetric corridor at +100/-700 basis points around the MPR; raising the Cash Reserve Ratio (CRR) to a minimum of 32.5 percent, and keeping the Liquidity Ratio at 30.0 percent.

While the CBN has taken steps to tame the rising inflation and stabilize the economy with these measures, the consequences will be the realities of a harsher economy as Nigerians would be made to pay the price.

The increased MPR is going to have a direct impact on the economy as the manufacturing sector would suffer most with the loss of jobs and non -recruitment of additional workforce.

With the uncertainty of holding on to forex and with the high overhead cost due to the cost of petroleum products, there is bound to be job cuts and many businesses may go under as the real sector will have fewer funds to meet spending demands.

In a bid to meet up with the increased interest rates, bank customers with loans may be told to expect an increase in their interest rates as this will make the banks earn more from interest income but down the line, will experience tougher times as the loan application will start to decline.

This decline in the banks' interest earnings will hit harder as the CBN starts the implementation of the liquidity mop-up by deducting funds from the banks in a bid to implement the CRR.