6 out of the 11 monetary policy committee members unanimously voted to raise the interest rate from 11.5% to 13%; a motion confirmed by the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, would take effect soonest. 

Driving the news
According to the Governor of Nigeria’s apex bank, they made the decision to raise the interest rate on the premise of rescuing Africa’s most populated nation from the ramifications of Covid-19 pandemic. And also, the global uncertainties associated with the Russia-Ukraine crisis, which have primarily heightened prices of commodities in Nigeria. 

Worthy of note 

  • The monetary policy rate (MPR) increased to 13% for the first time since July 2016, while they kept the Liquidity Ratio at 30%. 
  • The asymmetric corridor kept basis points of +100/-700 around basis points while CRR stayed at 27.5%. 

What you should know

  • The increase in interest rates has a slim chance of solving the country’s inflation crisis, as the root cause of inflation in the country is supply rather than demand. Africa’s largest economy continues to suffer devaluation irrespective of government policies on forex trade. 
  • Just last week, naira traded at N610/$1 while Nigeria’s 5-year Eurobond yields crossed 11% according to nairametrics showing the negative impact of forex scarcity and higher inflation rates in the country. 
  • At the CBN’s last monetary council meeting in March 2022, the Governor, Godwin Emefiele, claimed that raising the interest rate would oppose plans to lower inflation rates in the country. With the CBN turning back on this stance two months later, they evidently misjudged the inflation crisis in the country. 
  • CBN made a u-turn on interest rates seeing the negative impact stable rates have on gaining foreign interest for its bonds.
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