CBN Hikes Interest Rate to 18.5%
The monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) has increased the benchmark interest rate by 50 basis points to 18.5%. To curb inflation, the CBN monetary policy tightening started in May 2022 and has resulted in 8% rate hikes thus far.
The committee retained the asymmetric corridor of +100/-700 basis points around the monetary policy rate and maintained cash reserve requirements (CRR) at 32.5%, and Liquidity Ratio at 30.0%.
At the just concluded meeting, 10 members voted to raise the MPR by 50bps while 1 member voted to increase the MPR by 25bps. In the same vein, the Committee voted to maintain other policy parameters at the current levels
MPC was concerned about the Q1-2023 GDP growth which came at 2.31% year on year, a decline when compared with 3.52% year-on-year growth recorded in the fourth quarter of 2022.
The meeting attributed the positive performance to the sustained growth in the services sector, progressive uptrend in economic activities, and sustenance of broad-based support by the bank in growth-enhancing sectors.
Like the prior meeting, the Committee expects that real GDP will continue its moderate recovery over the rest of the year as legacy headwinds linger. Hence, the CBN projects the economy to grow by 3.03% year on year in 2023.
The Committee acknowledged that headline inflation remains high largely due to a host of non-monetary factors outside the reach of the CBN such as intermittent PMS scarcity, expectations of short-term hikes in PMS prices, and lingering challenges confronting the food supply chain.
The meeting called on the fiscal authorities to explore other avenues to expand the fiscal safety net and address the urgent need to respond to legacy challenges and emerging shocks impeding the food supply. #Naira Steadies as Banks Issue Update on FX Purchase
#CBN Hikes Interest Rate to 18.5%
