For Fifth Consecutive Time, CBN Hikes Interest Rate To 17.5%
For the fifth consecutive time, the Central Bank of Nigeria (CBN) hiked its benchmark interest rate by 100 basis points to 17.5 percent citing persistent inflation and moderating economic growth.
However, all other parameters remained unchanged as the asymmetric corridors were retained at +/-700 basis points around the MPR, while Cash Reserve Ratio (CRR) was sustained at 32.5 percent and the Liquidity Ratio at 30 percent.
Briefing newsmen at the end of its two-day Monetary Policy Committee (MPC) meeting on Tuesday in Abuja, the CBN governor, Godwin Emefiele, said the 100 basis points hike was necessary to consolidate the gains already recorded from aggressive tightening, stressing that inflation rate at 21.34 percent remains high just as growth remains subdued.
He, therefore, insisted that loosening was not an option in view of the current economic indices. He explained that among the MPC members, none voted for loosening or for a hold while one voted for a 150 basis hike, instead, a majority voted for a 100 basis further hike.
“For those members who felt that an aggressive stance was needed, they were of the view that Nigeria’s inflation at a rate above 20 percent was already a threat and among the highest in the world. To this group of members, aggressively raising the policy rate was paramount to rein in inflation because an aggressive tightening stance will further narrow the negative real interest rate margin,” Emefiele told newsmen.
According to the CBN boss, MPC’s decision to hike was unanimous, with seven of 12 members voting for the 100 basis-point hikes, four calling for a 50 basis-point increase, and one preferring 150 basis points. He said that CBN has to sustain its aggressive monetary stance so that the gains of tightening will be consolidated, stressing that loosening was not an option.
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The apex bank had increased the benchmark interest rate by 150 basis points in May, 100 basis points in July, 150 basis points in September, and 100 basis points in November 2022 before today’s further hike.
The interest rate hike is coming on the heels of moderating inflation rate according to the latest report by the National Bureau of Statistics (NBS), Nigeria’s statistics office, which was printed at 21.34 percent in December 2022, down from 21.47 percent in the preceding month of November.
Emefiele said MPC “members welcome the recent deceleration of the year-on-year headline inflation, noting that the persistence in policy rate hike over the last few meetings of the committee have started to yield the expected decline in inflation. Committee, therefore, decided to sustain the current stance of policy at this point in time to further rein in inflation aggressively.”
Fielding questions from journalists, Emefiele also ruled out an extension of the deadline for withdrawal of old currency notes of N200, N500, and N1,000 saying commercial banks had not recorded any rush by people trying to deposit the old currency notes as anticipated, and therefore no reason for the extension of the deadline.
“The reason is that just like the President has said more than two occasions and even to people privately, that for us, 90 days, in fact, we feel it is 100 days, that it is enough for anyone who has money or the old currency to deposit it in the bank. And we took every measure to ensure all the banks remain open to receive all old currencies.
“100 days we believe is more than adequate. We called on the banks, not only are we requesting you to extend your banking hours so that you can receive old currencies, but we are also asking you to keep your doors open on Saturdays, ladies, and gentlemen, the banks did not even have any reasons to even keep their banking halls open on Saturdays neither did they see the kind of rush that they anticipated.
“We do not see any reason to begin to talk about a shift because people could not deposit their old monies into their banks,” the apex bank governor insisted.
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