ABUJA, Feb. 27 (Xinhua) — Nigeria’s central bank on Tuesday took decisive action by increasing the monetary policy rate by 400 basis points to 22.75 percent.
The move, which marked a notable shift in the country’s monetary policy stance, was in response to mounting inflationary pressures and exchange rate instability, Yemi Cardoso, governor of the Central Bank of Nigeria (CBN), who chairs the Monetary Policy Committee, told the media at the end of a meeting in the capital of Abuja.
“The committee’s decisions are centered around the current inflationary and exchange rate pressures, projected inflation, and rising inflation expectations,” Cardoso said.
While the cash reserve ratio was increased from 32.5 percent to 45 percent, the liquidity ratio was retained at 30 percent, he said, noting the monetary policymakers were concerned about the persistent rise in inflation.
The monetary policymakers remained committed to reversing the inflationary trend as the balance of risk leans toward rising inflation, according to Cardoso.
Local experts said that by raising the monetary policy rate, the central bank aimed to tighten monetary conditions, curtail inflationary pressures, and stabilize the exchange rate.
“The move reflects a proactive approach to safeguarding price stability and bolstering investor confidence amid prevailing economic uncertainties,” Ademidun McCann, an Abuja-based economic researcher, told Xinhua.
McCann also noted that the decision to raise interest rates is expected to have wide-ranging implications across various sectors of the economy.
“While it may help rein in inflation, higher borrowing costs could dampen consumer spending and investment activity, potentially exerting downward pressure on economic growth,” the economist added.
