CBN Increases Interest Rate To 27.5 Per Cent

In a move aimed at curbing inflationary pressures in the country, the Central Bank of Nigeria (CBN) has raised its benchmark interest rate, also known as the Monetary Policy Rate (MPR), to 27.5 per cent. This is a 50 basis points increase from the previous rate of 27 per cent.

The CBN also raised the Cash Reserve Ratio (CRR) by 500 basis points to 50 per cent. The CRR is the percentage of deposits that commercial banks are required to keep with the CBN.

Decision Made by MPC

The decision to increase the interest rate was made by the Monetary Policy Committee (MPC) of the CBN, which met on Monday and Tuesday to review the state of the economy.

Despite signs of moderating inflation, the MPC believes that a higher interest rate is necessary to ensure price stability. The committee also expressed concerns about the potential impact of the 2024 general elections on the economy.

Impact on the Economy

The increase in interest rate is expected to have a significant impact on the economy, particularly on borrowing costs for businesses and individuals. It may also affect the value of the naira and the overall inflation rate.

“The increase in interest rate will make borrowing more expensive for businesses and individuals, which may slow down economic growth,” said Dr. Biodun Adedipe, a Lagos-based economist. “However, it may also help to reduce inflationary pressures and stabilize the currency.”

Reactions from Stakeholders

Stakeholders in the economy have reacted to the increase in interest rate, with some expressing concerns about the potential impact on economic growth.

“The increase in interest rate is a welcome development, as it will help to reduce inflationary pressures and stabilize the currency,” said Mr. Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry. “However, it may also make borrowing more expensive for businesses and individuals, which may slow down economic growth.”

Conclusion

The increase in interest rate by the CBN is a move aimed at curbing inflationary pressures in the country. While it may have a positive impact on price stability, it may also have a negative impact on economic growth. As the economy continues to evolve, it is essential to monitor the impact of the increase in interest rate and make adjustments as necessary.