The Central Bank of Nigeria (CBN) on Tuesday announced further tightening of the monetary policy by raising the Monetary Policy Rate (MPR) by 200 basis points, to 24.75 per cent from 22.75 per.
The Governor of the CBN, Yemi Cardoso, made this known while presenting the communique from the 294th meeting of the apex bank’s Monetary Policy Committee (MPC).
Cardoso also announced the MPC decisions to adjust the Asymmetric Corridor at +100/-300 basis points around the MPR; retain the Cash Reserve Ratio (CRR) for Deposit Money Banks at 45 per cent and retain the Liquidity Ratio at 30 per cent.
He said that the committee also decided to adjust CRR of merchant banks from 10 per cent to 14 per cent.
He said that the MPC was faced with the option of either progressing with its tightening cycle or hold, to observe the impact of the previous rate hike and adjustment of the Cash Reserve Requirement.
“After reviewing the balance of risks and the near-term inflation outlook, members were convinced of the need to progress with the tightening cycle,” he said.
According to the CBN governor, the main focus of the meeting was to review recent economic and financial developments.
He said that the consideration of the committee focused on the present inflationary pressure and the need to anchor inflation expectations and ensure sustained exchange rate stability.
“These considerations underscore the importance of CBN’s commitment to price stability mandate and the need to urgently bring inflation under control to ensure that the purchasing power of ordinary Nigerians is restored in the short to medium term.
“Members noted that the continued rise in headline inflation is driven largely by food prices because of supply shortages and high cost of logistics and distribution.
“The committee was of the view that addressing food insecurity is key to containing current inflationary pressures,” he said.
He said that the MPC commended ongoing efforts of the federal government towards addressing food insecurity.
He listed some of these measures to include the provision of various palliatives, release of grains from the strategic reserves and distribution of seeds and fertilisers, as well as farm implements for dry season farming.
“The committee, therefore, called for the full implementation of federal government’s agriculture policies and programmes to improve food supply.
“It further advised for further fiscal consolidation, particularly the improvement of tax collection and tax-to-GDP ratio,” Cardoso said.
The News Agency of Nigeria (NAN) reports that this is the second MPC meeting to be chaired by Cardoso.
In its 293rd meeting in February, the first under Cardoso, the committee increased the MPR by 400 basis points from 18.75 per cent to 22.85 per cent. (NAN)