Rédaction Africa Links 24 with Ayodeji Adegboyega
Published on 2024-03-26 14:08:20
The Central Bank of Nigeria (CBN) announced on Tuesday that it was increasing the interest rate by 200 basis points from 22.75 percent to 24.75 percent in response to soaring inflation rates. This decision was made after a two-day Monetary Policy Committee (MPC) meeting held on Monday and Tuesday.
According to the National Bureau of Statistics, the country’s annual inflation rate rose to 31.70 percent from 29.90 percent the previous month, driven primarily by a continuous surge in food prices.
Governor of the CBN, Olayemi Cardoso, revealed that the MPC voted to adjust the asymmetric corridor around the Monetary Policy Rate (MPR) by +100 to -300 basis points. The committee also decided to maintain the Cash Reserve Ratio (CRR) at 45 percent for commercial banks and raise the CRR of merchant banks from 10 percent to 14 percent, while keeping the liquidity ratio at 30 percent.
The decision to raise the interest rate was influenced by the current inflationary pressures and the need to stabilize inflation expectations and maintain exchange rate stability. The CBN emphasized its commitment to its price stability mandate and the urgency to bring inflation under control to safeguard the purchasing power of Nigerians.
The committee identified food prices as a major driver of headline inflation due to supply shortages and high costs of logistics and distribution. They emphasized the importance of addressing food insecurity to alleviate inflationary pressures. The committee acknowledged the efforts of the federal government in addressing food insecurity through various measures such as providing palliatives, distributing seeds and fertilizers, and releasing grains from strategic reserves.
Furthermore, the committee recommended the full implementation of the government’s agricultural policies to enhance food supply and advised on broader fiscal consolidation, particularly improving tax collection and the tax-to-GDP ratio.
Going forward, the MPC will continue to monitor global and domestic economic developments to anchor inflation expectations and restore macroeconomic stability. The next MPC meeting is scheduled for May 20 and 21.
In conclusion, the CBN’s decision to raise the interest rate reflects its commitment to addressing inflationary pressures and stabilizing the economy. The focus on food security and agricultural policies highlights the importance of addressing underlying factors contributing to inflation. By implementing these measures and monitoring economic developments, the CBN aims to restore and sustain macroeconomic stability in Nigeria.
Read the original article on Premium Times
