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Amid surging inflation, CBN raises interest rate to 26.25%

Following last year’s removal of the fuel subsidy and the naira’s float, Nigerians are experiencing historically high inflation levels.

CBN Governor, Olayemi (Yemi) Cardoso

Following a comprehensive two-day meeting, the bank’s Monetary Policy Committee (MPC) has made a decisive move, raising the Monetary Policy Rate (MPR) for the third consecutive time.

According to Channels TV, this measure aims to control the country’s high inflation, recorded at 33.69% in April 2024.

CBN Governor Yemi Cardoso, who was present at the meeting, said, “The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held its 295th meeting on the 20th and 21st of May 2024 to review recent economic and financial developments and assess risks to the outlook.

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“Decisions of the MPC. The committee’s decisions are as follows: 1. Raise the MPR by 150 basis points to 26.25 per cent from 24.75 per cent.”

Cardoso announced that the Cash Reserve Ratio (CRR) for Deposit Money Banks (DMBs) remains at 45 percent. The Monetary Policy Committee (MPC) set the Asymmetric Corridor around the Monetary Policy Rate (MPR) at +100 and -300 basis points and kept the liquidity ratio at 30 percent.

The CBN chief acknowledged the country’s rising inflation and stated that the main goal of the MPC meeting was to stabilise prices using available tools to control inflation.

He attributed the inflation primarily to food price increases, pointing to rising transportation costs, infrastructure problems, insecurity, and exchange rate issues.

Monday’s announcement comes amid surging commodity prices and an increasing cost of living.

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Following last year’s removal of the fuel subsidy and the naira’s float, Nigerians are experiencing historically high inflation levels.

Despite ongoing protests and pressure from labour unions, President Bola Tinubu has urged patience, expressing confidence that his government’s reforms will eventually be beneficial.

To address the declining value of the naira, the CBN recently targeted the cryptocurrency exchange Binance, among other measures, which initially led to an appreciation of the currency. However, these gains have stagnated in recent weeks.

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