In a move aimed at taming the country’s persistent inflationary pressure, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has announced a significant increase in the benchmark lending rate to 26.75%.
The decision, disclosed by the CBN Governor, Olayemi Cardoso, at the end of the 296th MPC meeting held in Abuja on Tuesday, represents the latest in a series of rate hikes implemented by the committee since the start of the year.
The MPC has maintained a hawkish stance in its efforts to rein in inflation, having already increased the Monetary Policy Rate (MPR) by more than 500 basis points thus far in 2024. The rate was previously raised to 26.25% in May.
The latest adjustment comes in response to the country’s worsening inflationary landscape, with the National Bureau of Statistics reporting that headline inflation had reached 34.19% in June, up from 33.95% in the previous month. On a year-on-year basis, the June 2024 inflation rate was 11.40 percentage points higher than the 22.79% recorded in the same period of 2023.
Moreover, the month-on-month inflation rate in June 2024 stood at 2.31%, a 0.17 percentage point increase from the 2.14% recorded in May, indicating a faster pace of price growth.
Addressing the decision, Governor Cardoso reiterated the MPC’s unwavering commitment to achieving price stability, stating that the committee is prepared to maintain a tight monetary policy stance until inflation is brought under control.
The CBN’s move was anticipated by several investment houses, with Cowry Asset Management projecting a 25-50 basis point hike and Meristem anticipating a more aggressive 100 basis point increase to 27.25%. These projections underscored the widespread belief that the MPC would prioritize inflation control and capital inflow sustainability, which are crucial for maintaining a stable exchange rate system.
As the central bank continues its battle against the nation’s elevated inflation levels, the latest interest rate hike is expected to have far-reaching implications for businesses, consumers, and the broader economic landscape.
