In response to escalating inflation, the Central Bank of Nigeria (CBN) has raised its Monetary Policy Rate (MPR) for the third consecutive time, increasing it by 150 basis points from 24.75% to 26.25%.
This decision was made during the bank’s 295th Monetary Policy Committee (MPC) meeting held on May 20-21, 2024.
CBN Governor Yemi Cardoso, who also chairs the MPC, announced the increase on Tuesday, highlighting that the primary goal is to curb the country’s rising inflation, which reached 33.69% in April 2024.
“The Monetary Policy Committee’s decision is to raise the MPR by 150 basis points to 26.25% from 24.75%,” said Cardoso. Despite the rate hike, the Cash Reserve Ratio (CRR) for Deposit Money Banks (DMBs) remains unchanged at 45%.
Additionally, the MPC maintained the Asymmetric Corridor around the MPR at +100 and -300 basis points and kept the liquidity ratio at 30%.
Cardoso attributed the inflation surge mainly to food inflation, driven by factors such as increasing transportation costs, infrastructure and security challenges, and exchange rate issues. The decision to raise interest rates aims to stabilize prices amid these pressures.
The announcement comes amidst soaring commodity prices and a rising cost of living, exacerbated by the removal of the fuel subsidy last year and the floating of the naira. Despite protests and pressures from labor unions, President Bola Tinubu has urged patience, expressing confidence that his government’s reforms will eventually stabilize the economy.
