Central Bank of Nigeria Hikes Interest Rate To 18.75%

Central Bank of Nigeria (CBN)'s Acting Governor, Folashodun Shonubi, addressed the country's exchange rate, revealing that the interest rate has been increased to 18.75 percent.

This is the first decision made by the Monetary Policy Committee (MPC) since Bola Tinubu became President of Nigeria on May 29.

Following a two-day meeting of MPC on Monday and Tuesday in Abuja, Acting Governor Shonubi spoke with the media and said that the market needs to find its level, adding that there is a "pent-up demand which the market cannot cater to."

"Once we clear this demand, the volatility will normalize. We have started intervening, and we would continue to intervene until the market gets to our level," he said, Punch reported.

Revealing the outcome of the meeting, the acting governor disclosed that the majority of members have agreed to increase the interest rate i.e., Monetary Policy Rate (MPR) to 18.75 percent.

The decision was eventually made to increase the rate "Considering the option to a hold, the Committee reviewed the impact of the continued rise in inflation on various macroeconomic variables, noting the potential dampening effect on output growth," Shonubi said, Vanguard reported.

He continued, "Members agreed unanimously that the previous series of rate hikes had indeed greatly moderated the pace of price development and was gradually but steadily yielding the expected outcome."

The National Bureau of Statistics (NBS) disclosed last week that Nigeria's inflation has increased for the sixth month in a row to reach 22.79 percent in June--the highest in 17 years.

Another report released in April noted that to fight against inflation in the country, the Nigerian Central Bank "raised the monetary policy rate by a cumulative 500 basis points in 2022, to 17.5 percent, and increased the cash reserve ratio from 27.5 percent to 32.5 percent."

"Despite these aggressive rate hikes, inflation has remained stubbornly high and is predicted to remain above 20 percent in 2023, due to the persistence of the structural and policy issues," the report mentioned.