The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) rose from its 298th meeting in Abuja on Tuesday with a unanimous decision to further raise interest rate by 25 basis points to 27.50 per cent from 27.25 per cent, in a strategic effort to battle the raging inflation, stabilise the economy and plant it on progress path.
The Governor of CBN and Chairman of the MPC, Mr Yemi Cardoso, made the disclosure while reading the communique to the media.
Cardoso revealed that the committee resolved to keep all other monetary policy parameters unchanged. Consequently, the MPC maintained the Cash Reserve Ratio (CRR) at 50 percent for Deposit Money Banks (DMBs) and 16 percent for merchant banks, upheld the Liquidity Ratio at 30 percent, and retained the Asymmetric Corridor at +500/-100 basis points around the Monetary Policy Rate (MPR). He further disclosed that these decisions received unanimous approval from all 12 MPC members present at the meeting.
Tuesday’s decision marks the sixth consecutive increase in the Monetary Policy Rate (MPR) under Cardoso’s leadership as CBN governor. His tenure began with a bold move in February, raising the MPR by an unprecedented 400 basis points, from 18.75 percent to 22.75 percent. This was followed by a 200 basis-point hike in March, bringing the rate to 24.75 percent. Subsequent adjustments saw the MPR climb to 26.25 percent in May, 26.75 percent in July, and 27.25 percent in September. In total, Cardoso has elevated the MPR by an impressive 875 basis points since taking office.
Reacting to the development, economic experts said the move by the CBN was well anticipated.
According to Nigeria’s first professor of the capital market, Prof Uche Uwaleke, the marginal rate increase is a signal that the CBN will completely pause or apply the brake beginning from the first quarter of next year.
“This has to happen to stem the rising cost of funds and negative impact on credit access so that small businesses in particular can breathe.
Ahead of the festive season, Cardoso addressed concerns about cash shortages, assuring the public that the CBN is actively monitoring and managing the situation.
“We are ensuring that banks receive adequate cash and conducting spot checks to address any distortions,” he said, hinting at potential ad hoc measures to meet the surge in demand during the holidays.
Cardoso, reaffirmed the apex bank’s commitment to combating inflation and ensuring foreign exchange stability, while urging Nigerians to be patient as the effects of monetary tightening measures take time to materialize.
He also said that the bank has resolve to tackle inflation through a return to orthodox monetary policies. “We are committed to staying the course,” he said, noting that monetary policies typically take six to twelve months to yield visible results.
The CBN governor projected that significant progress would be evident by the first quarter of 2025, noting of ongoing collaborations with relevant agencies to address structural impediments like supply disruptions and infrastructure deficits.
Addressing concerns over the naira’s exchange rate, Cardoso acknowledged the rise in foreign reserves to $40.8 billion and an increase in diaspora remittances to $611 million. These improvements, he explained, are results of deliberate policy actions by the CBN, including removing bottlenecks in remittance channels.
However, he differentiated between currency stability and value, noting that the bank’s focus remains on stability. Cardoso noted that the naira’s value depends on broader economic fundamentals like demand, supply, and balance of payments. He called on Nigerians to reduce reliance on foreign goods, emphasising the importance of local production in improving the currency’s strength over time.
Reflecting on recent engagements with Nigerians in the diaspora during the World Bank and IMF meetings, Cardoso highlighted the launch of the Non-Resident Account Program. Scheduled to commence in December 2024, he said the program aims to simplify account-opening processes for Nigerians abroad, enhancing remittance flows and formal financial engagement.
Cardoso also spoke about the progress in financial inclusion, which has reached approximately 95% of the adult population. He stressed the need for public-private partnerships to sustain this momentum, particularly in reaching underserved groups such as women, youth, and micro, small, and medium enterprises (MSMEs). “These sectors, if properly energized, will contribute significantly to economic growth,” he noted.
From Adanna Nnamani, Abuja @TheSUN
