Central Bank of Nigeria Raises Monetary Policy Rate to 27.25%, Increases CRR for Banks
September 24, 2024
By Okafor Joseph
In a move that signals the Central Bank of Nigeria’s continued focus on combating inflation, the apex bank has once again raised the country’s Monetary Policy Rate (MPR). This latest increase sees the rate climb from 26.75% to 27.25%, following a 50 basis point hike approved by the Monetary Policy Committee (MPC).
The news was confirmed via a post on the Central Bank’s official X (formerly Twitter) account, which stated:
“The Monetary Policy Committee (MPC) voted to raise the Monetary Policy Rate (MPR) by 50 basis points from 26.75% to 27.25%.”
Additionally, the Central Bank has decided to increase the Cash Reserve Ratio (CRR) by 50 basis points, pushing the requirement for Deposit Money Banks (DMBs) from 45% to 50%, while the CRR for Merchant Banks will rise from 14% to 16%. These measures are part of a broader strategy to manage liquidity in the banking sector.
The committee also opted to retain the Liquidity Ratio (LR) at 30% and the Asymmetric Corridor at +500/-100 basis points around the MPR. These policy adjustments, particularly the CRR hikes, aim to tighten control over the amount of funds banks have available for lending, which is expected to influence inflationary pressures.
While the Central Bank has frequently cited monetary policy adjustments as a critical tool for curbing inflation, current economic conditions and inflation figures raise questions about the effectiveness of this approach. Nigeria’s inflation rate remains stubbornly high, and some experts argue that higher interest rates may not be sufficient to address the root causes of the nation’s economic challenges.
A report from Sahara Reporters previously highlighted that Nigeria’s MPR is among the highest globally, surpassing rates in several advanced economies such as the United Kingdom, United States, and the Eurozone. For comparison, the United States’ monetary policy rate stood between 5.25% and 5.5% as of the first quarter of 2024, while the United Kingdom’s was 5.25%. The Eurozone recorded a rate of 4.5%, with Japan maintaining a rate of 0%.
Other emerging markets also present varied rates. Brazil’s rate stands at 10.75%, Russia at 16%, India at 6.50%, and China at 3.45%. Closer to home, South Africa’s rate is 8.25%, Mexico’s is 11%, and Indonesia’s is 6%.
These comparisons underscore the unique economic pressures Nigeria faces, prompting the Central Bank’s aggressive stance on monetary policy. However, the continued hikes in interest rates raise concerns about their potential impact on business growth, consumer borrowing, and the overall cost of living.
As the Central Bank continues its battle against inflation, the question remains whether these policy shifts will deliver the intended relief for Nigeria’s economy, or if further intervention will be required to stabilize the nation’s financial landscape.
