CBN raises monetary policy rate less than expected

Central Bank of Nigeria has raised its main lending rate by 25 basis points to 18.75%, less than expected, in a decision announced on Tuesday. The rate decision is the first since new President Bola Tinubu suspended central bank governor Godwin Emefiele, who had used unorthodox policies to keep the country’s currency artificially strong and lent directly to businesses to try to boost economic growth. At the last monetary policy meeting under Emefiele in May, the central bank raised its policy rate by 50 basis points. Acting CBN Governor, Folashodun Shonubi, announced this on Tuesday after the bank’s Monetary Policy Committee (MPC) meeting in Abuja. This is the first decision of the monetary committee since President Bola Tinubu’s assumption of office on May 29, 2023.

It is also the first decision of the committee in about a decade without embattled Godwin Emefiele who was suspended as the governor of the apex bank on June 9, 2023. Last week, Nigeria’s headline inflation rose to 22.79 per cent in June from the 22.41 per cent recorded in May 2023 amid soaring food prices and rising cost of transportation occasioned by the removal of subsidy on Premium Motor Spirit known as petrol. This was according to the latest Consumer Price Index (CPI) report released by the National Bureau of Statistic (NBS). The CPI measures the rate of change in prices of goods and services. Shonubi, who addressed pressmen at the CBN headquarters in Abuja on Tuesday, said “hiking the interest rate has made a lot of difference in moderating the rate of inflation”.

The CBN MPC voted to hike MPR by 25 basis points to 18.75% from 18.5%. The committee narrowed asymmetric corridor to +100/-300 from +100/-700 and retained the Cash Reserve Ratio (CRR) at 32.5%. He also said the volatility around foreign exchange rates would soon normalise.