The Central Bank of Nigeria has revised the country’s interest rate and raised it from 14% to 15.5%.
The interest rate was revised by the policy-setting committee of the CBN. They raised the monetary policy rate (MPR), which measures the interest rate, in an attempt to secure the money market within an economy.
The decision to increase the interest rate was driven by the widening rate of inflation both in local and foreign markets.
This is the third time the bank is raising the benchmark interest rate in five months. The apex bank had raised the interest rate from 11.5% to 13% back in May, and in July, the interest rate shot up from 13% to 14%.
The Governor of the Central Bank of Nigeria, Godwin Emefiele, told reporters on Tuesday that 10 of its committee members voted to increase the interest rate. In addition, they also raised the cash reserve ratio (the share of a bank’s total customer deposit that must be kept with the central bank in the form of liquid cash) from 27.5% to 32.5%.
Godwin Emefiele stated, “It was of the view that with the aggressive policy normalization of the economies, losing the stance of policy will result in a sharp decrease of exchange rate leading to further hikes that will be afloat.”
“Als, it will help consolidate the impact of the last two policy rate hikes which is already reflected in the slowing growth rate of oil supply in the economy. We also understand that an aggressive rate hike will slow capital outflows, likely attract capital inflows, and appreciate the naira.” He added.
“We will keep increasing the interest rate to reduce the high effect of inflation.”
While the move to increase the interest rate might stabilize the money market, it would also inadvertently hurt small and even large business owners, as the cost of capital and cost borrowing becomes more expensive.
Eyewitness? Submit your stories now via social or:
Email: eyewitness@pulse.ng
