UPDATED: CBN increases benchmark interest rate to 17.5%

The Central Bank of Nigeria on Tuesday raised its benchmark lending rate to 17.5 per cent in an aggressive push to contain the nation’s inflationary pressure.

The CBN governor, Godwin Emefiele, announced this Tuesday after the apex bank’s Monetary Policy Committee (MPC) meeting that began Monday.

Addressing journalists at the end of the two-day meeting in Abuja, Mr Emefiele said the committee voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR.

He also disclosed that the MPC voted to keep the Cash Reserve Ratio (CRR) at 32.5 per cent, as well as the Liquidity Ratio at 30 per cent.

The CRR is the share of a bank’s total customer deposit that must be kept with the central bank in form of liquid cash, while the bank’s liquidity ratio is the proportion of deposits and other assets they must maintain to be able to meet short-term obligations.

In November, the MPC raised its benchmark lending rate to 16.5 per cent in a sustained push to control inflation and ease pressure on the naira.

In December, the nation’s statistics bureau said Nigeria’s s inflation figure dipped to 21.34 per cent from 21.47 per cent in November after 10 straight monthly increases. In the same month, the statistics bureau said food inflation which is one of the driving forces of Headline Inflation dropped to 23.75 per cent from 24.13 per cent a month earlier.

On Tuesday, Mr Emefiele announced that the committee welcomed the recent deceleration in the nation’s inflation rates, noting that the persistence in the policy rate increase over the last few meetings of the committee has started to yield the expected decline in inflation.

The committee deliberated on either to hike rates further or hold to examine the impact of the last four rate increases, Mr Emefiele said, adding that the options considered were primarily to hold the rate or tighten further to consolidate the previous gains.

However, the MPC noted that loosening the rate will gravely undermine the gains of the last four increases, hence the hike in rate.