From: Amadi Vincent Uzoma
Quoting the importance of controlling inflation and achieving price stability, the Central Bank of Nigeria, CBN, increased its benchmark interest rate, the Monetary Policy Rate, MPR, by 150 basis points to 26.25 percent from 24.75 percent yesterday. This marks the third rate hike in less than three months. During a briefing at the end of the Monetary Policy Committee meeting in Abuja, CBN Governor, Mr. Olayemi Cardoso, emphasized that there is no quick-fix solution.
Cardoso highlighted that despite the rate hike, the Cash Reserve Ratio (CRR) for deposit money banks remains at 45 percent and the Liquidity Ratio at 30 percent.
The governor expressed confidence in the effectiveness of the measures employed by the bank to tackle inflation and stabilize the foreign exchange market, expecting to see positive results in the following months. The inflation rate had been on a steady rise for over 13 months, reaching 33.69 percent year-on-year due to food inflation.
He also acknowledged the challenges posed by food inflation but mentioned that there were signs of moderation in the overall inflation rate, attributing it to the efficacy of the bank’s measures.
Cardoso stressed the need for addressing issues like transportation costs of farm produce, infrastructure constraints in distribution networks, security challenges in food-producing areas, and exchange rate effects on domestic prices for imported food items in order to effectively curb food inflation.
The CBN governor expressed optimism about the increasing confidence of investors in the country, noting that transparency initiatives have positively impacted foreign portfolio investors. He emphasized that the regulations around Fintech companies were aimed at strengthening the sector and ensuring maximum benefit for the Nigerian public, rather than putting them out of business.
He raised concerns about illicit financial flows and money laundering within the Fintech sector, prompting increased surveillance. Despite heightened regulatory guidelines, no Fintech organization has had its license revoked by the CBN, as the bank aims to support and strengthen these entities.
In response to the MPR increase, Sola Obadimu, Director General of the Nigerian Association of Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA), highlighted the challenges it poses for business managers in the country. Similarly, Dr. Muda Yusuf, founder of the Centre for the Promotion of Private Enterprise (CPPE), pointed out that the rate hike would impose additional burdens on investors with credit exposures to banks, urging for necessary fiscal policy support to counteract the impacts of strict monetarism on the economy.
