Citing the need to rein in inflation and achieve price stability, the Central Bank of Nigeria, CBN, yesterday raised its benchmark interest rate, the Monetary Policy Rate, MPR, by 150 basis points to 26.25 percent from 24.75 percent, the third raise less than three months.
CBN Governor, Mr. Olayemi Cardoso, disclosed this while briefing journalists at the end of the Monetary Policy Committee, MPC, meeting in Abuja.
The apex bank, however, retained the Cash Reserve Ratio, CRR, for deposit money banks at 45 percent and the Liquidity Ratio at 30 percent.
Cardoso expressed optimism that the various tools deployed by the bank to tame inflation and create a stable foreign exchange market would yield the needed results in the coming months.
Inflation had sustained upswing for over 13 months hitting 33.69 percent Year-on-Year, YoY, fueled by food inflation.
Cardoso also noted that despite pressure from food inflation, the general inflation rate was “moderating”, pointing out that “the tools the Central Bank is using are working”.
He stated: “I have several times and I will say again, there is no magic wand. These are things that need to take their time. I am pleased and confident that we are beginning to get some relief and in another couple of months we will see the more positive outcomes from the Central Bank have been doing”.
He added, “The committee thus reiterated several challenges confronting the effective moderation of food inflation to include rising costs of transportation of farm produce, infrastructure-related constraints along the line of distribution network, security challenges in some food producing areas, and exchange rate pass-through to domestic prices for imported food items.
“The MPC urged that more be done to address the security of farming communities to guarantee improved food production in these areas. Members further observed the recent volatility in the foreign exchange market, attributing this to seasonal demand, a reflection of the interplay between demand and supply in a freely functioning market system”.
Cardoso said investors’ confidence in the country was growing, adding, “we have attempted to make the market more transparent in our dealings which foreign portfolio investors want to see and which gives them the added confidence.
“We have seen that they have responded very positively to the transparency initiatives and that have given a considerable amount of confidence to them. The removal of the distortions that we all know about which over time have resulted in a multiplicity of different circulars to address certain things have also helped in no small measure to boost confidence in the sector”.
