CBN increases interest rate to 14%

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday announced a tightening of monetary policy stance by increasing the monetary policy rate by 200 basis points from 12 per cent to 14 per cent.

It, however, left the Cash Reserve Ratio and the Liquidity Ratio unchanged at 22.5 per cent and 30 per cent respectively.

The CBN Governor, Mr Godwin Emefiele, who announced the decision of the committee after a two-day meeting said five out of the eight members that attended the meeting voted in favour of monetary tightening.

The remaining three members, according to him, voted to hold the rate at 12 per cent.

The Monetary Policy Rate is the anchor rate at which the CBN, in performing its role as lender of last resort, lends to Deposit Money Banks to boost the level of liquidity in the banking system.

If the apex bank intends to increase the level of liquidity in the economy, it reduces the MPR but increases it when it intends to tighten money supply.

In taking the decision to increase MPR, the governor said the committee was faced with two policy choices whether to stimulate growth or to fight inflation.

He, however, said when considered from the standpoint that the primary mandate of the CBN is to maintain price stability, the committee decided to focus on its mandate by checking inflationary pressures. – Punch.