Nigeria’s central bank hikes key interest rates days after naira falls to new lows – Africa Bitcoin News

Following the recent Monetary Policy Committee meeting, the Central Bank of Nigeria said it has raised the monetary policy rate to 15.5%. By raising key interest rates by 150 basis points, the central bank hopes to “narrow negative interest rate differentials and control inflation.” The price hike comes days after the naira’s parallel currency hit a new low against the dollar.

Narrowing the negative real interest rate differential

According to the Central Bank of Nigeria (CBN), the members of the monetary policy committee of the bank “unanimously decided to raise the policy rate to stabilize the inflation rate.” After the vote, Nigeria’s key interest rate – the Monetary Policy Rate (MPR) – now stands at 15.5%, up from 14%.

The CBN said in a statement that it decided to increase the MPR by 150 basis points because MPC members felt that any effort to ease the policy rate would be harmful.

In this [MPC] The option of easing the policy rate was not taken up as this would be highly detrimental to reviving inflation… Hence, the committee unanimously decided to raise the Monetary Policy Rate (MPR) and the Cash Reserve Requirements (CRR). 10 members voted MPR based on 150, one member based on 100, and another member based on 50 points.

Nigeria’s inflation, now up 280 basis points in four months. It stands at 20.52% in August 2022. To prevent it from escalating further, the MPC said it is important to ensure that the CBN is given “greater attention.” [is] Given to curb inflation.

Meanwhile, the bank’s decision to hike the MPR comes days after the Nigerian currency hit a new low against the US dollar. According to a Bloomberg report, the parallel market value of the naira dropped from 715 naira to 720 naira per dollar. In the regular market, one US dollar was buying less than 440 Naira.

Following the recent significant devaluation of the naira, the spread between the currency’s official and parallel market currency is now over 280 naira.

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Terence Zimwara

Terence Zimwara is an award-winning Zimbabwean journalist, writer and author. He has written extensively about the economic woes of some African countries and how digital currencies offer Africans an escape route.