By Kadiri Abdulrahman, Abuja/Ige Adekunle, Sango-Ota (Ogun)
May 24, 2022
For the first time in over two years, the Central Bank of Nigeria (CBN) has increased the Monetary Policy Rate (MPR) to 13 per cent.
Mr. Godwin Emefiele, Governor of the CBN, said this while reading the 285th communiqué issued at the end of the apex bank’s Monetary Policy Committee (MPC) meeting on Tuesday.
Emefiele said that the committee also decided to retain all other parameters.
Thus, the asymmetric corridor was retained at +100/-700 Basic Points around the MPR, the Cash Reserve Ratio (CRR) retained at 27.50 per cent and the Liquidity Ratio retained at 30.00 per cent.
The News Agency of Nigeria (NAN) reports that MPC had retained the former MPR of 11.5 per cent for over two years.
Emefiele said the committee was faced with various options but was guided by the need to slow down inflationary pressure while engendering economic growth.
He said that, though the 11 MPC members unanimously voted to raise the MPR, they provided divergent opinions on the level of increase.
“Six members voted to raise the MPR by 150 basis points, four members’ by100 basis points and one member, by 50 basis points.
“Members expressed deep concern about the continued uptrend of inflationary pressure in spite the gradual improvement in output growth.
“Committee notes that the current rise in inflation is inimical to growth and the full recovery of the Nigerian economy,’’ he said.
He said that several options were considered before the decision to increase the MPR.
“After carefully reviewing developments in the two months, and outlook of growth in the domestic and global economy as well as downsides of each policy.
“It is clear and compelling that tackling inflation is more urgent in sequence of policy objectives.
“MPC urged the CBN to double its effort at supporting the priority growth-enhancing sectors of the economy.
“It urged the Federal Government to do more to provide a safe and secure environment for economic activities to stimulate growth,’’ he said.
Reacting, a financial expert, Dr Samuel Nzekwe, commended the MPC of the CBN for raising the benchmark interest rate.
Nzekwe, a former president of the Association of National Accountants of Nigeria (ANAN), gave the commendation in an interview with the News Agency of Nigeria (NAN) on Tuesday in Ota, Ogun.
NAN reports that the CBN Governor, Mr. Godwin Emefiele, had on Tuesday announced the increase of the Monetary Policy Rate (MPR) from 11.5 per cent to 13 per cent.
The boss of the apex bank said that Cash Reserve Ratio (CRR) and Liquidity Ratio were, however, retained at 27.5 per cent and 30 per cent respectively.
Nzekwe said the decision of the MPC to increase MPR and retain all other monetary policy parameters was a step in the right direction.
According to him, the committee is, by this, trying to battle with the nation’s inflation rate.
“The raising of the MPR is to discourage people or investors from borrowing from the banks, because the CBN believes there is too much money in circulation.
“The MPC wants fewer people to borrow, because if you raise the interest rate, it would stop people or investors from borrowing from the banking system,” he said.
Nzekwe also gave kudos to the MPC for not changing the CRR and liquidity ratio, so that the banks could have enough funds for their operations.
He noted that most of the polices of the MPC could have impacted more significantly on the economy if the country was a producing nation.
According to him, the volatility leading to rising inflation rate is internal rather than external, as the country is not producing enough goods for consumption.
The former ANAN president, therefore, appealed to the Federal Government to create enabling environment for the productive sector to thrive, so that the pressure on imported goods could be drastically reduced.
This, he said, would strengthen the nation’s currency and generate more revenue for the country.