Nigeria to face harder times as CBN raises interest rate

Nigeria may have to face harder times following the raising of the interest rate by the Central Bank of Nigeria.

The benchmark interest rate set by the CBN, the Monetary Policy Rate (MPR), was raised for the third time in a row on Tuesday to 15.5 percent.

The CBN raised the cash reserve ratio (CRR) from 27.5 percent to 32.5 percent during the two days the Monetary Policy Committee (MPC) convened in Abuja. The percentage of total customer deposits that must be maintained in liquid cash at the central bank is known as the CRR.

This took into consideration the fragile growth and continued inflation rate increase. The headline inflation rate in Nigeria rose to 20.52 percent in August 2022, the highest level in 17 years, from 19.64 percent.

The CBN recently increased the MPR by a total of 250 basis points in an effort to curb inflation. At its meeting in May 2022, the CBN raised its benchmark interest rate for the first time in six years, by 150 basis points, to 13%. It raised it by an additional 100 basis points in July, reaching 14 percent.

All MPC members decided to maintain the other conditions after the meeting. As a result, the MPR’s 30% Liquidity Ratio and +100/-700 basis point Asymmetric Corridor were retained by the CBN.

Following the meeting, CBN Governor Godwin announced that the MPC expressed its unwavering resolve to restore price stability while providing the necessary support to strengthen the fragile recovery and noted with concern the continued aggressive movement in inflation, even after the rate hike at its meeting in May and July 2022.

The three consecutive rises in interest rates are anticipated to boost foreign investment and lessen pressure on the naira.