BusinessNewsNigeriaCBN raises interest rate to 22.75% to tame inflation

The Central Bank of Nigeria, CBN, has raised its benchmark lending rate to 22.75 per cent as a proactive measure to control inflation.

Olayemi Cardoso, the CBN governor, announced this on Tuesday at the end of the bank’s Monetary Policy Committee (MPC) meeting that began Monday.

The new rate is 400 basis points from the previous rate of 18.75 per cent, maintained since the MPC’s last convening on July 24 and 25, 2023.

“Previous policy rate hikes have slowed the rise in inflationary pressure but not to a desirable extent,” said Cardoso, explaining the rationale behind the aggressive push.

The MPC meeting, the first under Cardoso, had been viewed by many Nigerians as a test of the bank’s seriousness in curbing worsening inflation.

Nigeria’s inflation rate currently stands at 29.90 per cent, largely driven by the removal of fuel subsidy and the dramatic depreciation of the naira that has seen the local currency losing about 50 per cent of its value against the dollar after tight forex rules were relaxed in June 2023.

“Members considered various scenarios of hold and hike and concluded that inflation could pose more persistent in the medium term and thus pose more regulatory challenges if not effectively anchored. The balance of the argument, thus, leads convincingly in favour of a significant policy rate hike to drive down inflation substantially,” Cardoso said.

To further stabilise the economy, the MPC voted to raise the Cash Reserve Ratio, CRR, from 32.5 per cent to 45 per cent while the liquidity ratio was retained at 30 per cent.

These measures, as well as the resumption of the sales of foreign currencies to Bureau de Change operators after it banned same in 2021, it is hoped, will strengthen the weakening naira and halt the rising inflation.

About the resumption of foreign currencies to the BDCs, the CBN said on Tuesday that it will provide each eligible BDC with $20,000 weekly at a rate of N1,301 per dollar which would be sold to Nigerians at a margin not exceeding one per cent above the purchase rate from the CBN.