In an attempt to absorb excess liquidity ahead of the 2023 general elections, The Central Bank of Nigeria (CBN) has raised the Monetary Policy Rate (MPR) to 13.5%
The Monetary Policy Committee (MPC) of the apex bank of Nigeria concluded its three-day meeting on Tuesday, May 24, 2022.
At the end of the meeting, the Committee decided to raise the Monetary Policy Rate (MPR) while maintaining other policy parameters. The benchmark interest rate (MPR) was raised by 150 basis points (bps) to 13% from 11.50%.
It maintained the asymmetric corridor at +100/-700 bps around the MPR, the cash reserve ratio at 27.50%, and the liquidity ratio at 30.00%.
According to Dr Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise [CPPE], the committee’s decision will raise the cost of funds for SME borrowers, affecting their operating costs, product prices, and profit margins.
He believes that, while there will be some negative effects on the equity market, investors in fixed income instruments will benefit from the increase.
Meanwhile, CBN Governor Godwin Emefiele told reporters after the committee meeting at the apex bank’s headquarters in Abuja that the sharp rise in inflation across both advanced and emerging market economies has raised growing concerns among central banks, as the progressive rise in inflation driven by rising aggregate demand and wage growth has put sustained pressure on price levels.
It should be noted that the policy-setting committee of the nation’s financial regulator raised the MPR, which measures interest rates, for the first time in two and a half years.
The MPR serves as the baseline interest rate in an economy, upon which all other interest rates are based.