The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has recently announced a significant rise in the benchmark interest rate as part of its efforts to combat the increasing inflation rate.
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The new Monetary Policy Rate (MPR) now stands at 24.75%, up from the previous rate of 22.75%. CBN Governor Yemi Cardoso, speaking to journalists after the MPC meeting, emphasized the committee’s dedication to curbing inflation and restoring the purchasing power of Nigerians.
He outlined several policy adjustments, with the most notable being the substantial increase in the MPR.
This move aims to make borrowing more expensive, thereby reducing spending and slowing down economic growth, ultimately leading to a decrease in inflation.
The CBN has also made adjustments to the Cash Reserve Ratio (CRR) for commercial banks, maintaining it at 45%, while increasing the CRR for merchant banks from 10% to 14%.
Additionally, the liquidity ratio remains unchanged at 13%, with the aim of tightening control over the money supply in circulation and further dampening inflationary pressures.
Cardoso stressed the significance of food security in the fight against inflation and urged the federal government to fully implement its agricultural programs to increase domestic food production and reduce reliance on imported food items, which are susceptible to price fluctuations.
While the increased interest rate may have a ripple effect on the Nigerian economy, causing borrowers, including businesses and individuals, to pay more for loans and potentially impacting investment and consumer spending, the CBN’s actions are ultimately aimed at bringing down inflation in the long run.
This would benefit Nigerians by stabilizing prices and protecting their purchasing power.
