Tough Times Ahead For Bank Debtors, Businesses As CBN Raises Benchmark Lending Rate To 15.5%
The Central Bank of Nigeria on Tuesday increased the Monetary Policy Rate to 15 per cent.
This is the highest rates adopted by the CBN after it held the Minimum Rediscounted Rate (MRR) at 15 per cent on August 17, 2003……Continue Reading
The MRR was the rate adopted by the CBN until it introduced a new Monetary policy framework in 2006 which replaced MRR with Monetary Policy Rate (MPR).
The CBN governor, Godwin Emefiele at the 287th Monetary Policy Meeting said “its decision was a move to save the naira and curb inflation.
The members voted unanimously to raise the rates.
Benchmark lending rate was as low as six per cent thirteen years ago in 2009.
When Covid-19 struck in 2020, the MPC reduced the MPR by 100 basis points from 12.5 to 11.5 per cent.
But this was increased to 13.0 per cent and by another 100 basis points to 14 per cent in May and July 2022 respectively.
The CBN’s move was geared at curbing the growing inflation which has failed to abate despite the hike in rates.
Currently, Nigeria’s inflation is at 20.52 per cent according to the National Bureau of Statistics Consumer Price Index for in August 2022.
Foreign exchange scarcity is a major factor driving prices and has led to devaluation of naira which is currently trading around N720 at the black market and N431.8 at the CBN rates.
During the meeting, the apex bank governor said high energy cost and electricity tariff pushed the inflation upwards.
According to him, the increase in US rates has also pressured the naira and making investors exit the Nigerian market.
Emefiele said broad outlook remains clouded due to headwinds of the Ukraine war and residual impacts of Covid-19.
He said the Nigerian economy will grow but at a “much subdued rate” due to the increased demand for money driven by the 2023 general election.
According to him, the rise in inflation over the past four months has been worrisome.
The CBN governor said loosening inflation would worsen Nigeria’s economic condition as well as naira depreciation.
He said a tight policy stand would help appreciate the naira.