Olayemi Cardoso, CBN governor
By Jon Egie with agency report
The private sector operators of the Nigerian economy predicts that an accelerated inflation and massive job cut is expected following the hike in Monetary Policy Rate, MPR, also known as interest rate from 22.75 per cent to24.75 per cent.
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The explanation was given by the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, and the Nigerian Association of Small Scale Industrialists adding that the increase in MPR would worsen the private sector’s ability to access affordable credit.
While they described the interest rate hike as a move that would come with unintended negative consequences, the Lagos Chamber of Commerce and Industry said the MPR hike was a price that businesses would have to pay, given the current state of the economy.
The CBN again increased the MPR to 24.75 per cent from 22.75 per cent despite concerns about economic hardship.
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The CBN Governor, Yemi Cardoso, announced this after the second Monetary Policy Committee meeting for the year in Abuja on Tuesday.
He said the new rate was focused on reducing current inflationary pressures and ensuring sustained exchange rate stability.
“All 12 members of the committee decided to further tighten monetary policy by raising the MPR by 200 basis points to 24.75 per cent from 22.75 per cent. Adjust the asymmetric corridor around the MPR to +100 to -300 from plus 100 to -700 basis points,” he noted.
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With inflation at 31.70 per cent, Cardoso declared that the new MPR was part of moves to tackle the country’s inflation.
The bank had, during its previous meeting, raised the MPR significantly by 400 basis points to 22.75 per cent from 18.75 per cent.
It also made changes to the asymmetric corridor around the MPR, setting it at +100/-700 basis points from +100/-300 basis points
The CBN increased the Cash Reserve Requirement to 45 per cent from 32.5 per cent, and maintained the Liquidity Ratio at 30 per cent.
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Although the apex bank said it took the decision to fight inflation, the benchmark interest rate had been 22.75 per cent since the last MPC meeting that was held on February 26 and 27, 2024.
Briefing journalists on Tuesday, Cardoso, who chaired the MPC, also stated that the Cash Reserve Ratio of Deposit Money Banks was retained at 45 per cent, while the CRR of merchant banks was reviewed upward from 10 per cent to 14 per cent.
He disclosed that the liquidity ratio was left unchanged at 30 per cent.
Cardoso said the MPC noted the increase in food inflation from 35.41 per cent to 37.9 per cent as part of the consideration of the committee for revealing the interest rate.
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“From our perspective, the key thing is to be fully focused on our core mandate to fight inflation and stablise the economy. The purchasing power of the average person should be restored to the level it should be,” he said.
The apex bank’s governor added that the economy would be stabilised by the end of the year.
“Things should moderate from May and the inflation rate should come down by the end of the year,” he stated.
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Justifying the reasons for the hike, the former Lagos State Commissioner for Finance explained that the MPC was faced with the option of either progressing with its tightening cycle or holding to observe the impact of the previous rate hike and adjustment of the Cash Reserve Requirement.
He added that the MPC’s decision to tighten the economy was based on economic data and market analysis to fulfil its price stability mandate.
Credit: PUNCH
