The monetary policy committee of the Central Bank of Nigeria (CBN) has raised the prime lending rate otherwise known as the monetary policy rate (MPR), from 14 percent to 15.5 percent to curtail inflation.
Recall that in July this year, the committee raised MPR to 14 percent from 13 percent.
The monetary policy rate (MPR) is the reference interest rate that determines every other interest rate used within the Nigeria economy.
The Committee expressed concern over the heightened risk of spillovers associated with the broadly weakening global recovery, noting that these have been further exacerbated by uncertainties emanating from lingering supply chain bottlenecks, due to the Russia-Ukraine war and continued COVID-19 lockdown in China.
The MPC was concerned that within a four-month period, inflation had accelerated aggressively by 280 basis point from 17.71 per cent in May 2022 to 20.52 per cent in August 2022.
The Committee was thus, of the view that given the primacy of its price and monetary stability mandate, it was expedient that significant focus must be given to taming inflation.
The Committee thus voted unanimously to raise the Monetary Policy Rate (MPR) and the Cash Reserve Requirement (CRR). Ten members voted to raise the MPR by 150 basis points, one member by 100 basis points, and another member by 50 basis points.
Ten Members voted to increase the CRR by 500 basis points, while two Members voted to increase CRR by 750 basis points.
Finally the MPC decided to:
I. Raise the MPR to 15.5%;
II. Retain the asymmetric corridor of +100/-700 basis points around the MPR;
III. Increase the CRR to a minimum of 32.5%; and
IV. Retain the Liquidity Ratio at 30.0%