CBN increases interest rate to 27.25 per cent

• The Monetary Policy Committee of the Central Bank of Nigeria has decided to increase the benchmark interest rate to 27.25 percent.

• The monetary policy rate is the fundamental interest rate in an economy.

• The MPR serves as the foundation for all other interest rates in an economy.

The Monetary Policy Committee of the Central Bank of Nigeria has resolved to increase the benchmark interest rate, also referred to as the monetary policy rate (MPR), to 27.25 percent.

The monetary policy rate serves as the fundamental interest rate within an economy.

This MPR acts as the basis for all other interest rates prevailing in the economic landscape.

During a press briefing following the committee’s fifth meeting of the year at the CBN headquarters in Abuja on Tuesday, the governor of the central bank, Olayemi Cardoso, announced that the committee members reached a unanimous decision to further tighten monetary policy.

This adjustment represents a rise of 50 basis points from the previous rate of 26.75 percent, which was set by the central bank in July 2024.

The new rate signifies an 8.5 percent increase in interest rates since the current administration assumed office a year ago.

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

Additionally, the MPC has maintained the asymmetric corridor surrounding the MPR at +500 to -100 basis points and has increased the Cash Reserve Ratio for deposit money banks by 500 basis points to 50 percent, while raising the ratio for merchant banks by 200 basis points to 16 percent, up from 14 percent, and keeping the liquidity ratio steady at 30 percent.

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.”

Despite a recent decline in inflation rates, many financial analysts had expected the CBN to either maintain or reduce interest rates.

However, the MPC’s decision to tighten monetary policy further underscores a steadfast commitment to ensuring economic stability in the face of both global and domestic challenges.