The Central Bank of Nigeria (CBN) has announced another increase in its Monetary Policy Rate (MPR), raising it to 27.25%.
The decision was made on Tuesday during the Monetary Policy Committee (MPC) meeting chaired by CBN Governor, Yemi Cardoso.
Cardoso noted that the move will help improve confidence, which will enable economic agents to plan in the medium to long term.
“The committee was, however, unanimous in recognising that a lot more is required to actualise the bank’s price stability mandate,” he noted.
“The MPC noted that even though headline inflation trended downwards due to a moderation in food inflation, core inflation has remained elevated, driven primarily by rising energy prices.
“The uptrend poses severe concerns to members as it clearly indicates the persistence of inflationary pressures. Members thus reiterated the need to work in close collaboration with the fiscal authority to address the current upward pressure on energy prices.
“The MPC noted the continued growth in money supply, recognising the need to curtail excess liquidity in the system as well as address foreign exchange demand pressures.”
Cardoso said the MPC was worried about the fiscal deficits.
However, he said the federal government has pledged not to resort to ways and means for monetary financing.
“Members were also concerned about the growing level of fiscal deficit but acknowledged the commitment of the fiscal authority not to resort to monetary financing through ways and means,” he said.
Also, Cardoso lauded the federal government for the effort put into stabilising food prices.
He said the committee expressed optimism that “the lifting of refined petroleum products from Dangote Petroleum Refinery will moderate transportation costs and significantly support the easing of food price pressures in the short to medium term”.
“This is also expected to moderate foreign exchange demand for importation of refined petroleum products, with a positive spillover on external reserve and improvement in the overall balance of payment position,” he said.
Recall that in July 2024, the CBN raised its Monetary Policy Rate (MPR) by 800 basis points to 26.75 per cent, up from 13 per cent in May 2022.
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