The Central Bank of Nigeria’s Monetary Policy Committee (MPC) has made its first interest rate decision under the Bola Tinubu administration, raising the monetary policy rate (MPR) from 18.5 percent to 18.75 percent. This decision comes after other monetary policy actions, including the naira float, were taken by the bank since the new government took office on May 29, 2023.
Acting Governor Folashodun Shonubi announced the rate hike to journalists after the committee’s meeting at the CBN headquarters in Abuja. This meeting is also the first MPC gathering since the suspension of Godwin Emefiele as CBN governor.
Nigeria’s inflation rate recently reached 22.79 percent due to rising food prices, prompting the CBN to take measures to curb inflation. Despite President Tinubu’s campaign promise to reduce interest rates, the bank has chosen to increase interest rates to address inflation concerns.
Shonubi explained that the committee members voted to raise the rate by 25 basis points to 18.75 percent, adjust the asymmetric corridor around the MPR to +100 and -300 basis points, and maintain the cash reserve ratio (CRR) at 32.5 percent and liquidity ratio at 30 percent.
The moderate rate increase aims to anchor inflation expectations, narrow the negative real interest rate gap, and boost investor confidence. Additionally, committee members agreed that previous rate hikes have effectively moderated the rate of price increases.