By John Ikani
The Central Bank of Nigeria (CBN) has raised the country’s key interest rate, the Monetary Policy Rate (MPR), to 17.5%.
The MPR is considered the benchmark interest rate in Nigeria, with all other interest rates in the economy being based on it.
The hike which is a part of effort geared towards combating inflation, was announced by the Governor of the apex bank, Godwin Emefiele during a meeting of the CBN’s policy-setting committee.
Emefiele explained that despite a slight moderation in inflation in December, the economy still faces the risk of high inflation, which could have negative consequences on the standard of living for Nigerians.
According to him, the committee believes that tightening the interest rate would help dampen aggregate demand, which has been a major contributor to inflation.
The CBN governor also announced that the committee voted to retain the asymmetric corridor at +100 and -700 basis points around the MPR, as well as keeping the cash reserve ratio and liquidity ratio at 32.5% and 30%, respectively.
Analysts have largely welcomed the move, stating that it is a necessary step in addressing the country’s inflationary pressures.
However, some have warned that the hike in interest rates could also slow down economic growth, which has already been affected by the COVID-19 pandemic.
