CBN raises interest rate to 27.25 per cent

The Central Bank of Nigeria’s Monetary Policy Committee has decided to raise the benchmark interest rate, or monetary policy rate (MPR), to 27.25 percent.

An economy’s basic interest rate is known as the monetary policy rate.

The MPR is the foundation for all other interest rates in an economy.

Addressing journalists at an ongoing press briefing after the committee’s fifth meeting for the year at the CBN headquarters on Tuesday in Abuja, the governor of the apex bank, Olayemi Cardoso, said the committee members unanimously decided to further tighten monetary policy.

This new rate is an increase of 50 basis points from 26.75 per cent announced by the apex bank in July 2024.

The new rate reflects an 8.5 per cent increase in interest rates under the current leadership, which took office a year ago.

Cardoso said, “The committee was unanimous in its decision to further tighten policy and thus decided as follows, one: raise the MPR to 27.25 per cent.”

However, the MPC retained the asymmetric corridor around the MPR at +500 to -100 basis points and raised the Cash Reserve Ratio of deposit money banks by 500 basis points to 50 per cent and merchant banks by 200 basis points to 16 per cent from 14 per cent and retain the liquidity ratio at 30 per cent.

He added, “The MPC decided to retain the asymmetric corridor around the MPR at plus 500 to minus 100 basis points. It also raised the Cash Reserve Ratio of deposit Money banks by 500 basis points to 50 per cent from 45 per cent and merchant banks by 200 basis points to 16 per cent from 14 per cent and retain the liquidity ratio at 30 per cent.”

Although inflation has been declining in recent months, many financial analysts anticipated that the CBN would either maintain or lower interest rates.

However, the MPC’s choice to tighten monetary policy further indicates a sustained commitment to preserving economic stability amidst both global and domestic challenges.