The Central Bank of Nigeria (CBN) has announced a significant increase in its Monetary Policy Rate (MPR), raising it to 27.25 percent during the recent Monetary Policy Committee (MPC) meeting.
This marks another strategic move by the CBN to combat persistent inflationary pressures and restore economic confidence.
The Governor of CBN, Mr. Olayemi Cardoso emphasised that the decision aims to enhance economic planning among various stakeholders.
“The committee was, however, unanimous in recognising that a lot more is required to actualise the bank’s price stability mandate,” he stated, highlighting the complexities of the current economic environment.
While the CBN noted a downward trend in headline inflation due to easing food prices, core inflation remains elevated, primarily driven by surging energy costs.
“The uptrend poses severe concerns to members, clearly indicating the persistence of inflationary pressures,” Mr. Cardoso warned, reiterating the necessity for close collaboration with fiscal authorities to address the ongoing upward pressure on energy prices.
The MPC expressed its concerns regarding the increasing fiscal deficit. However, Mr. Cardoso assured that the federal government has committed to avoiding monetary financing through ‘ways and means,’ which could exacerbate inflation.
In a positive note, Mr. Cardoso commended the federal government’s initiatives aimed at stabilising food prices. He expressed optimism that the commencement of refined petroleum product lifting from Dangote Petroleum Refinery would help reduce transportation costs, thereby easing food price pressures in the short to medium term. This development is also expected to decrease foreign exchange demand for importing refined petroleum products, contributing positively to Nigeria’s external reserves and overall balance of payments.
This latest hike in the MPR follows a significant increase in July 2024, when the CBN raised the rate by 800 basis points to 26.75 percent, up from 13 percent in May 2022.