CONTACT US 08072633727 📲 on WhatsApp/Call📞
For your Advert, Publicity, Birthday Greetings, Press Release, Promotional Content, Special Report, Featured story, Event Coverage, Conference, Interviews, And So On.

Nigerians face harder times as CBN increases interest rate for 3rd consecutive time

61

The Monetary Policy Committee, MPC, of the CBN increased Monetary Policy Rate, MPR, from 14 per cent to 15.5 per cent on Tuesday to tame inflation. The committee had increased the MPR by a total of 250 basis points at its last two meetings.

The MPR is the baseline interest rate in an economy; every other interest rate used within that economy is built on it.

CBN Governor, Godwin Emefiele, announced the new rate after the September bi-monthly MPC meeting in Abuja.

This is the third consecutive hike of the MPR, the benchmark interest rate for the country’s financial market in 2022.

The MPC also raised Cash Reserve Ratio to 32.5 per cent from 27.5 per cent while holding other parameters constant.

The Asymmetric Corridor, thus, remains at +100/-700 basis points around the MPR, and the Liquidity Ratio remains at 30 per cent. Asymmetric interest rate corridor is a new tool developed to increase the flexibility of monetary policy.

It provides the ability to make timely responses to external finance or risk sentiment shocks through active management of daily open market operations.

ALSO READ  'Be your brothers’ keepers’ — says Gombe as FIRS, Lagos, Rivers Lock Horns Over VAT

The MPC noted with concern the continued aggressive movement in inflation, even after the rate hike at its meeting in May and July.

“It expressed its unrelenting resolve to restore price stability while providing the necessary support to strengthen the fragile recovery,” Mr Emefiele said.

Some experts had earlier projected that the CBN would increase the rates to rein in inflation.

Prof. Umhe Uwaleke, an economist, had said the MPC would increase the MPR again, by at least, 50 basis points.

Mr Uwaleke, a Professor of Capital Market at Nasarawa State University, said that his projection was informed by rising inflation.

“Aside inflationary pressure and the need to tame it, the MPC would be considering current global monetary developments such as the hike in policy rates by central banks in developed countries.

“For example, the U.S. Federal Reserve recently increased the benchmark rate by 75 basis points, while the Bank of England increased by 50 basis points,’’ he had said.

Mr Uwaleke said that monetary tightening by central banks of U.S. and the UK continued to trigger capital outflows from Nigeria with negative implications on the exchange rate.

ALSO READ  Current Prices Of Dangote Cement In Nigeria (July, 2021) As BUA Okays N3,000

The MPC would equally consider this as justification to increase the MPR,’’’ he said.

He, however, urged the MPC to hold the prevailing rates constant as tightening may not tame inflationary trend.

“Be that as it may, if I were a member of the MPC, I would vote for a hold position. In other words, I would advise that the policy rates be held.

“This is because the major drivers of inflation in Nigeria today are cost-push related rather than demand-pull.

“Furthermore, policy tightening may not really tame inflationary pressures that are stemming more from high cost of energy and negative impact of insecurity on food output.

“Any hike in rate at this time will hurt output growth through higher cost of lending to SMEs,’’ he said.

Dr Tope Fasua, another economist, urged the MPC to retain the subsisting rates as past rates increases had not tamed inflation.

“I expect that they may further raise rates. My advice to the MPC would be that they hold rates.

ALSO READ  Naira Notes Will Be Out Of Circulation Soon – CBN

“We have raised rates by 250 basis points in the last two meetings but inflation has surged further.

“This means that our own inflation is not tightly linked with interest rates and may recede in its own time.

“Ours is a bit of a carryover from the COVID-19 era of production shutdown and imported inflation because our economy is dependent on foreign ones battling inflation presently,’’ he explained.

According to Mr Fasua, raising rates further will only be a continuation of punishment for local industries which borrow locally and are struggling to achieve previous levels of production post Covid-19.

“Banks are always quick to raise lending rates anyway. The CBN had to recently force them to increase savings rates.

“Their margins are always so high, so the committee and the CBN must be careful about raising rates ad infinitum,’’ Mr Fasua said. (NAN). CONTINUE READING

Do you have any information you wish to share with us? Do you want us to cover your event or programme? For Adverts or report call/WhatsApp us on +2348072633727




Leave a Reply

Your email address will not be published. Required fields are marked *