The Central Bank of Nigeria (CBN) policy-setting committee increased the Monetary Policy Rate (MPR), which measures interest rates, from 17.5 percent to 18 percent.
The Monetary Policy Rate (MPR) is the baseline interest rate in an economy, upon which all other interest rates are based.
The governor of the central bank, Godwin Emefiele, announced the development on Tuesday after the committee met at the CBN headquarters in Abuja.
The move marks the apex bank’s second consecutive increase in the benchmark rate this year.
Emefiele stated that the committee members voted to raise the rate by 50 basis points to 18 percent, keep the asymmetric corridor around the MPR at +100 and -700 basis points, keep the Cash Reserve Ratio (CRR) at 32.5 percent, and keep the liquidity ratio at 30 percent.
He stated that, while inflation has remained elevated, the previous tightening measure has continued to slow the rate of price increases.
Concerned about the impact of the hawkish stance on the banking industry, the CBN governor stated that the apex bank’s stringent micro and macro-prudential guidelines have ensured the banking system’s stability and sustenance.
He cited the planned removal of gasoline subsidies as one of the reasons for the monetary policy committee’s tightening stance.
“Whether we like it or not, subsidy removal will most likely occur before the end of this administration in May,” Emefiele predicted.
“To close the negative real rate gap, we will continue to tighten, but more gradually.”