CBN Raises Interest Rate to 26.25% Amid Escalating Inflation

The Central Bank of Nigeria (CBN) has increased the interest rate by 150 basis points, raising it from 24.75% to 26.25%.

Following a two-day meeting, the bank’s Monetary Policy Committee (MPC) decided to hike the Monetary Policy Rate (MPR) for the third consecutive time to address the country’s soaring inflation, which reached 33.69% in April 2024.

CBN Governor Yemi Cardoso, who also chairs the MPC, announced on Tuesday, “The MPC of the CBN held its 295th meeting on May 20-21, 2024, to review recent economic and financial developments and assess risks to the outlook. The committee decided to raise the MPR by 150 basis points to 26.25% from 24.75%.”

Despite the rate hike, Cardoso noted that the Cash Reserve Ratio (CRR) for Deposit Money Banks (DMBs) remains at 45%. Additionally, the MPC maintained the Asymmetric Corridor around the MPR at +100 and –300 basis points and kept the liquidity ratio at 30%.

Cardoso acknowledged the country’s rising inflation, attributing it primarily to food inflation driven by factors such as increased transportation costs, infrastructure and security challenges, and exchange rate issues. The primary goal of the MPC meeting was to achieve price stability by utilizing available tools to control inflation.

The announcement comes amid escalating commodity prices and a rising cost of living, largely due to last year’s removal of fuel subsidies and the floating of the naira. Nigerians are grappling with historic inflation levels.

Despite protests and pressures from labor unions, President Bola Tinubu has urged patience, expressing optimism that his government’s reforms will eventually be beneficial.

In an effort to combat the devaluation of the naira, the CBN has recently targeted the operations of cryptocurrency exchange Binance.