The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) rose from its 149th meeting on Tuesday, with a decision to raise the lending rate from 18.5 to 18.75 per cent, to curb the country’s inflation currently pegged at 22.79 per cent.
The committee also adjusted the asymmetric corridor from +100/-700 to +100/-300 basis points around the Monetary Policy Rate (MPR). It retained the Cash Reserve Ratio (CRR) at 32.5 per cent and liquidity ratio at 30 per cent.
Speaking at a post-MPC meeting, the acting CBN Governor, Folashodun Shonubi said 11 members attended the meeting.
Shonubi in June began the partial undoing of some of Godwin Emefiele’s unorthodox monetary policies.
Despite the hike in lending rates, there are concerns that inflation has persisted, continuously moving upwards.
The National Bureau of Statistics (NBS) computed the rate without factoring in the impact of the fuel subsidy removal and naira depreciation.
Shonubi said inflationary prices remained elevated in most countries despite broad measures to redeem the markets.
He, however, noted that the lending rate hike has worked to moderate inflation as it could have been worse than it is currently if no monetary policy action was taken.
He added that the apex bank will deploy every tool in the box to reign in inflation.
On the new policy to float the naira, he said the volatility being experienced will soon fizzle out as the CBN deals with the pent-up foreign exchange demands.
Shonubi further revealed that external reserves have grown to $33.97 billion as accretion to external reserves remains weak.
Commenting on the CBN’s decisions, Nigeria’s first professor of the capital markets, Uche Uwaleke, said the tepid increase in lending rate by just 25 points to 18.75 per cent is an acknowledgement of the fact that there is very little the CBN can do to tame supply-side- induced inflation via the policy rate.
“The decision to maintain policy parameters could be misconstrued as insensitivity on the part of the CBN with respect to rising inflation.
“So, it does seem that the MPC decision is an attempt to thread a middle-of-the-road path,” he said.