With the annual Nigeria inflation rate which raised to a 17 year high of 20.52 percent in August, resulting to high cost of food items. The policy setting committee of Central Bank of Nigeria (CBN) has raised the Monetary Policy rate (MPR) from 14 percent to 15.5 percent. The third consecutive increase in 2022.
This development was announced by Godwin Emefiele, the Governor of CBN after 10 members of the committee ratify the need for an upward review. The committee also voted for a raise in the cash reserve ratio (CRR) to 32.5 percent from 27.5 percent. CRR refers to the share of a bank’s total customer deposit that must be kept with the central bank in the form of liquid cash.
Emefiele while addressing Press men informed that as inflation continues to an upward trend, the MPC will always hike rates to control the effect on citizen’s. He said “the tested monetary policy theory is that the easiest way to tame inflationary pressure is to raise rates”.
“We will keep increasing the interest rate to reduce the high effect of inflation ” he added.
According to the Nigeria Central Bank boss, the committee voted to retain the asymmetric corridor at + 100 and – 700 basis point around the MPR and liquidity ratio to a minimum of 32.5 percent.
Meanwhile Nigerians are feeling the financial pinch caused by the rising cost of living. Low income households are the most vulnerable to high food costs, the middle income earners are not feeling any better. research findings shows that 40% of low and middle income earners expenditure are allocated to food and 40 % goes to housing and utilities.
increased rates have implications for anyone with a mortgage, vehicle financing, student loan or any other form of debt. The monetary policy response to rising interest rates could further limit the affordability of financed purchases like cars, homes, and education.