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CBN Further Increases Monetary Rate To 15.5%

CBN
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September 27, (THEWILL) – As predicted by many analysts, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has, for the third time in five months, increased the official interest rate by an aggregate of 450 basis points.

At the end of its two-day meeting on Tuesday, September 26, 2022, the rate-fixing body announced a 1.50 percent raise to the existing (14 percent) MPR bringing it to 15.5 percent.

The committee had increased the MPR by 150 basis points in May 2022 – from 11.5 per cent to 13 per cent, and further to 14 percent in July.

The CBN governor, Godwin Emefiele, who announced the increase in MPR to 15.5 percent at a post-MPC press briefing in Abuja on Tuesday, pointed out that the global economy is still recovering from the effects of COVID,-19 which impacted Nigeria’s environment.

However, the MPC retained other monetary parameters constant around the MPR.

That implies that the apex bank’s asymmetric corridor of +100/-700 basis points was also retained, same for the Cash Reserve Ratio at 32 per cent, while Liquidity Ratio was also kept at 30 per cent.

The apex bank had before the May interest held the official interest rate at 11.5 per cent for two years to pursue a place of price stability that is conducive to growth

Many analysts had predicted that the exchange rate may unofficially hit close to N1,000 to a US dollar at the parallel market by the end of the year unless monetary policy managers – the CBN does something dramatically drastic.

As regard the decision to tighten, loosening or hold, the MPC members believed that loosening will worsen the existing liquidity condition in the country and further dampen money market rates

“Indications are rife that the Naira is inching closer and closer to official devaluation on the back of fund rate hikes in the United States of America, United Kingdom and the rest of Europe,” Gab Ikekhide, a financial analyst said.

The monetary policy rate decider, which has retained double-digit lending rate in response to persistent inflation, foreign exchange-for-imports pressures and pre-election year expectations, believes that further tightening would reign in liquidity glut and bring down the worsening devaluation of the Naira.