The Central Bank of Nigeria (CBN) has increased the Monetary Policy Rate (MPR) from 24.75 per cent to 26.25 per cent.
CBN Governor Olayemi Cardoso announced this during the meeting of the apex bank’s Monetary Policy Committee (MPC) in Abuja on Tuesday, May 21, 2024.
The MPR is the baseline interest rate in an economy which banks use to set their interest rates.
Cardoso, however, said the committee decided to hold all other parameters constant.
The Cash Reserve Ratio (CRR) was retained at 45 per cent, the Liquidity Ratio of 30 per cent was retained, and Asymmetric Corridor of +100/-300 basis points around the MPR was also retained.
Cardoso said the key focus of the committee at the meeting remained to achieve price stability by effectively using tools available to the monetary authority to reign in inflation.
He said the MPC members observed that while year-on-year headline inflation in April rose moderately, the month-on-month measures of headline, food, and core inflation all declined significantly.
Naira gains at official market, exchanges N1,468/$
“This follows a decline month-on-month of headline and food measures in March, suggesting that the recent tight monetary policy stance of the CBN is beginning to yield the desired outcome,” the CBN boss said.
Cardoso stated that the MPC, however, noted that inflationary pressure continues to be driven largely by food inflation.
He said: “The committee, thus, reiterated several challenges confronting the effective moderation of food inflation.
“They include rising cost of transportation of farm produce, infrastructure related constraints along the line of distribution network, and security challenges in some food producing areas.”
According to him, exchange rate pass-through to domestic prices for imported food items was also an impediment to taming food inflation.
The CBN Governor added that the MPC members urged that more be done to improve the security of farming communities to guarantee improved food production in these areas.
This is the third consecutive tightening of the MPR by the MPC under Cardoso.
At its 293rd meeting in February, the committee increased the MPR by 400 basis points from 18.75 per cent to 22.85 per cent.
The MPC also increased the interest rate by 200 basis points, to 24.75 per cent from 22.75 per cent in March 2024.
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