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On Wednesday, the Central Bank of Nigeria (CBN) implemented a hike in its benchmark lending rate from 18 percent to 18.5 percent, aiming to combat inflationary pressures.
During a two-day meeting in Abuja, the Monetary Policy Committee (MPC) of the CBN, chaired by Governor Godwin Emefiele, made this decision. Additionally, the MPC opted to maintain the asymmetric corridor around the Monetary Policy Rate (MPR) at +100 and -700 basis points.
The primary motivation behind the MPC’s choice to raise the lending rate was the escalating inflation rate within Nigeria. In April, inflation reached 16.82 percent, marking the highest level in 13 months. The committee attributed this increase to various factors, including elevated energy costs and challenges within the supply chain.
The MPC affirmed its commitment to closely monitor price trends and collaborate with the fiscal authority to address the root causes of inflation.
To combat inflation, the CBN has already raised the MPR six times since July 2021. The MPR stood at 11.5 percent at the beginning of last year.
While the decision to increase the lending rate may have a detrimental effect on economic growth, the CBN deems it necessary to rein in inflationary pressures.
