The Central Bank of Nigeria (CBN) has increased the benchmark interest rate by 150 basis points to 26.25% from 24.75%.
The Governor of the CBN, Yemi Cardoso announced this at a press briefing on Tuesday at the end of the two-day 295th Monetary Policy Committee (MPC) meeting of the Bank held on Monday and Tuesday.
Furthermore, the bank retained the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) at 45% and put the Asymmetric corridor around the MPR at +100 and –300 basis points.
He said the committee voted to retain the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks and adjust the CRR of merchant banks from 10 per cent to 14 per cent.
The committee also voted to retain the liquidity at 30 per cent.
According to him, the key focus of the meeting remains to achieve price stability by effectively using tools available to the monetary authority to rein in inflation.
Data from the National Bureau of Statistics indicates that the headline inflation rate in April rose to 33.69 per cent, up from 33.20 per cent in the previous month, mainly driven by rising food prices.
In April 2024, the year-on-year food inflation rate soared to 40.53 per cent, representing a rise of 15.92 percentage points from the 24.61 per cent recorded in April 2023.
Mr Cardoso said the MPC noted that the inflationary pressure continues to be driven largely by food inflation.
“The committee last 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”, he added.
The Governor said the committee was faced with the option of either continuing with policy tightening or holding to observe the impact of previous rate hikes.
He stated that after thoroughly reviewing the risks and the near-term inflation outlook, the balance of risks indicates the need for further policy tightening to enhance the benefits achieved from prior rate increases.
He announced that the next MPC meeting would be held on 22 and 23 July.
Before the latest MPC meeting, some financial experts had predicted an increase in the benchmark interest rate.
