CBN Raises Interest Rates By 50 basis Points to 26.75%

By Abiola Olawale

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has raised the interest rate for the fourth time in 2024 alone.

The Governor of the CBN, Olayemi Cardoso, announced on Tuesday that the interest rate has been increased by 50 basis points from 26.25% to 26.75%.

The apex bank boss made this announcement at the end of the apex bank’s 296th MPC meeting held in Abuja.

Cardoso who also doubles as the Chairman of the MPC revealed that the committee has pegged the Cash Reserve Ratio (CRR) for Deposit Money Banks at 45%, while that of merchant banks was put at 14%. The liquidity ratio was pegged at 30%.

The apex bank also adjusted the asymmetric corridor around the MPR from +100 to –300 basis points around the MPR to +500 and –100 basis points around the MPR.

Speaking on the reason for the 50-basis point hike, the CBN boss explained that recent events in the economy, such as inflation and the need to stabilize the foreign exchange market, as rationale for the increase.

He further referenced recent policies of the federal government to import specific staple foods such as rice, maize, and wheat to help stem the rising food inflation but warned that the timeline should be followed in order not to stifle the gains made in local food production.

The New Diplomat reports that the latest increase of the interest rate would be the fourth consecutive by the Central Bank in 2024 and continues from similar MPR hikes in 2023.

Also, the recent hike totals a cumulative 800 basis points hike in MPR since Cardoso took over the reins of the apex bank. This has seen the benchmark interest rate rise from 18.75% to 26.75%.

The apex bank in February increased the MPR by 400 basis points. This was followed by another 200 basis points and then 150 basis points before the latest increase.

While the CBN has continued to maintain that the hike in interest rates will crash down rising inflation, several individuals have raised concerns that the interest rates could prevent business owners from accessing capital.