CBN Increases Interest Rate to 27.5% Amid Inflation Concerns

By Mohammed Bello Doka 

The Central Bank of Nigeria (CBN) has once again raised the benchmark interest rate to 27.5%, marking a 25 basis point increase from the previous rate of 27.25%. This decision came at the conclusion of the 298th Monetary Policy Committee (MPC) meeting, held over two days in Abuja. CBN Governor, Olayemi Cardoso, made the announcement on Tuesday, November 26, highlighting the ongoing efforts to manage inflationary pressures in the country.

In his address, Cardoso stated that all members of the committee unanimously agreed to maintain the Asymmetric Corridor at +500 to -100 basis points. This measure is designed to stabilize the financial system amid persistent inflationary challenges. Additionally, the CBN’s foreign reserves have seen a slight uptick, rising to $40.88 billion as of November 21, 2024, up from $40.06 billion recorded at the end of October 2024.

The MPC decided to keep the Cash Reserve Ratio (CRR) for deposit money banks at 15%, while the liquidity ratio remains steady at 30%. These decisions follow a recent trend, as the committee had previously raised the Monetary Policy Rate (MPR) by 50 basis points in September, moving it from 26.75% to 27.25%.

Governor Cardoso emphasized that the committee’s actions are part of a sustained strategy to combat inflation, particularly the rise in food prices, which continues to impact the broader economy. "The Monetary Policy Committee (MPC) voted to raise the Monetary Policy Rate (MPR) by 25 basis points from 27.25% to 27.50%," he stated. "The committee also retains the Cash Reserve Ratio for Deposit Money Banks at 50% and 16% for Merchant Banks, while the Liquidity Ratio stays at 30%, with an Asymmetric Corridor at +500/-100 basis points around the MPR."

This move aligns with previous efforts by the CBN, as Cardoso had previously signaled a more aggressive approach to addressing inflation concerns. The decision reflects the bank’s ongoing commitment to stabilizing Nigeria's economy, even as it continues to face pressure from rising prices in key sectors, including food.