The Central Bank of Nigeria (CBN) has raised its benchmark interest rate by 50 basis points, bringing it from 26.25% to 26.75%. This significant move was announced by the Governor of the CBN, Mr. Olayemi Cardoso, following the conclusion of the bank’s 296th Monetary Policy Committee (MPC) meeting held in Abuja.

In his statement, Governor Cardoso explained that the decision to increase the interest rate was driven by the committee’s awareness of the adverse effects of rising prices on both households and businesses. He reaffirmed the committee’s commitment to implementing necessary measures to curb inflation and stabilize the economy.

In addition to the interest rate hike, the MPC set the Cash Reserve Ratio (CRR) for Deposit Money Banks at 45% and for merchant banks at 14%. This policy adjustment aims to manage liquidity more effectively within the banking system. The liquidity ratio was maintained at 30%, a figure designed to ensure banks have enough liquid assets to meet their short-term obligations.

Cardoso noted that while inflation saw an uptick in June 2024, the committee expects prices to moderate in the near term. This optimism is based on the belief that monetary policy will gain further traction, supported by additional fiscal measures to address food inflation.

The committee expressed concern over the persistent issues of food inflation and rising energy costs, which continue to undermine efforts to achieve price stability. Addressing these challenges remains a priority for the CBN as it seeks to balance economic growth with price stability.

The next meeting of the MPC is scheduled for September 23 and 24, where further economic developments and policy adjustments will be discussed.

For now, the financial community and the broader public will be keenly observing the outcomes of these policy changes and their effects on the economic environment in the coming months.

Credit: Nairametrics