CBN Retains Interest Rate At 27.5% As Inflation Drops After Rebasing

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has voted to retain the Monetary Policy Rate (MPR) at 27.5 percent.

The decision, announced by CBN Governor Olayemi Cardoso at a press conference in Abuja on Thursday, follows the committee’s 299th meeting.

Since the MPC began raising the MPR in May 2022 to curb inflation, the interest rate has been increased 15 times.

However, the latest decision to maintain the rate was influenced by recent economic indicators, including a decline in Nigeria’s inflation rate.

According to a report released by the National Bureau of Statistics (NBS) on Tuesday, inflation dropped to 24.48 percent from 34.8 percent, following a rebasing of the Consumer Price Index (CPI).

Cardoso said the committee members unanimously agreed to retain the MPR at 27.50 percent, while also keeping the Cash Reserve Ratio (CRR) at 50 percent and the liquidity ratio at 30 percent.

He noted that the committee was pleased with recent macroeconomic developments, which are expected to have a positive impact on price stability in the near to medium term.

“These include the stability in the foreign exchange market with the resultant appreciation of the exchange rate and the gradual moderation in the price of PMS,” he said.

Despite these improvements, Cardoso acknowledged the persistent inflationary pressures, primarily driven by rising food prices.

“Members, however, were not oblivious to the risk of persisting inflationary pressures driven largely by food prices,” he said.

He added that the committee took note of the revised Consumer Price Index (CPI) by the NBS, which adjusted the weights of items in the consumption basket to better reflect current consumption patterns.

“The committee further noted that as the federal government continues to improve security in food-producing communities, supported by other measures to enhance food supply, food prices are expected to continue to moderate,” Cardoso stated.

The committee also emphasised the need for stronger collaboration between the monetary and fiscal sectors to achieve price stability and sustainable economic growth.

 “The committee highlighted the benefits of the improvements in the external sector to exchange rate stability, including the convergence of rates between the Nigeria foreign exchange market and the bureau de change,” Cardoso said.

Additionally, the MPC urged the CBN to sustain efforts to boost market liquidity and maintain strict surveillance of the banking system, especially amid ongoing external and internal economic challenges.

Cardoso also highlighted the CBN’s policy measures aimed at anchoring inflation expectations, easing exchange rate pressures, deepening financial inclusion, and improving the transmission mechanism of monetary policy.

“The committee also urged the bank (CBN) not to relent in its efforts to boost market liquidity,” he said.

Boluwatife Enome

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