Many businesses and individuals will have to pay more to access funds in the Nigerian market as the country’s apex monetary policy committee (MPC) raises the prime lending rate, otherwise known as the monetary policy rate (MPR), to 13 per cent for the first time in two years.
The interest rate formally at 11.5 per cent was raised by 150 basis points to 13 per cent at the close of the committee’s meeting in Abuja on Tuesday.
Governor of the Central bank of Nigeria (CBN), Godwin Emefiele, who announced the new rates to journalists shortly after the meeting, justified the increase in lending rate on the grounds that the committee anticipates a steep rise in inflation that could distort the economy negatively.
“To prevent the looming inflation, the MPC had to increase the monetary policy rate by 150 basis points.” The CBN Governor said.
The committee retained the range at which commercial lenders could leverage their charges, otherwise known as “asymmetric corridor” around the MPR at +100 /-700 basis points while Cash Reserve Ratio remained at 27.4 per cent, and Liquidity Ratio at 30 percent.
According to Emefiele, Six members voted to raise the MPR by 150 basis points, four members’ by 100 basis points and one member, by 50 basis points.
In his words; “Members expressed deep concern about the continued uptrend of inflationary pressure in spite the gradual improvement in output growth.
“The Committee notes that the current rise in inflation is inimical to growth and the full recovery of the Nigerian economy.
“After carefully reviewing developments in the two months, and outlook of growth in the domestic and global economy as well as downsides of each policy.
“It is clear and compelling that tackling inflation is more urgent in sequence of policy objectives.” Emefiele said.
The committee asked the CBN to give more support to priority sectors that drive the nation’s economy.
Analysts expect higher inflation in months to come as spending on political activities gain traction in the country, leading to the 2023 polls.
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