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JUST IN: CBN increases benchmark interest rate to 17.5%

by Ayogen
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CBN increases benchmark interest rate to 17.5%

CBN increases benchmark interest rate to 17.5%

CBN increases benchmark interest rate to 17.5%

The policy-setting committee of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which measures interest rate, from 16.5 percent to 17.5 percent to rein in inflation “aggressively”.

In December, Nigeria’s inflation rate fell slightly from 21.47 percent to 21.34 percent.

The monetary policy rate (MPR) is the baseline interest rate in an economy, every other interest rate used within an economy is built on it.

Godwin Emefiele, governor of the apex bank, announced the development to journalists on Tuesday after the committee’s meeting at the CBN headquarters in Abuja.

This is the fifth time the CBN would increase the interest rate despite advice from manufacturers and some key stakeholders.

The CBN said previous increases were beginning to yield results with the slight drop in the inflation rate recorded in December 2022.

The MPC raised the monetary policy rate by 100 basis points to 17.5% and kept the asymmetric corridor at +100/-700 basis points around the MPR.

The MPC retained its Cash Reserve Ratio (CRR) at 32.5% while the liquidity ratio is kept at 30%.

Emefiele said MPC “members welcome the recent deceleration of the year-on-year headline inflation, noting that the persistence in policy rate hike over the last few meetings of the committee have started to yield the expected decline in inflation.”

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The CBN governor said the committee considered a perennial scarcity of Premium Motor Spirit known as petrol, the 2023 general elections, continuous rise in energy prices, exchange rate pressure as well as continuous rise in insecurity.

He said committee members noted that the naira redesign has huge moderating factors to price development on cash.

Announcing the committee’s decision, Emefiele said, “MPC was of the view that although the inflation rate moderated marginally in December, the economy remained confronted with the risk of high inflation with adverse consequences on the general standards of living.

“Committee, therefore, decided to sustain the current stance of policy at this point to further rein in inflation aggressively.

“MPC voted to raise the MPR to 17.5%, retain the asymmetric at +100/-700 basis points around the corridor.”

The CBN also said its January 31, 2023 deadline for the validity of the old N200, N500, and N1,000 notes remain.

On the CBN on October 26, 2022, announced its plan to redesign the three banknotes. President Muhammadu Buhari subsequently unveiled the redesigned N200, N500, and N1,000 notes on November 23, 2022, while the apex bank fixed a January 31 deadline for the validity of the old notes.

The CBN also pegged its weekly cash withdrawal limits to N500,000 for individuals and N5m for corporate firms.

There have been concerns from many Nigerians over the slow spread of the three new naira notes as the January 31 2023 deadline approaches but the apex bank has insisted that the date stands.

The CBN also recently directed commercial banks to halt over-the-counter payment of the new notes and load their Automated Teller Machines (ATMs) with the redesigned naira notes to boost circulation.

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The apex bank also launched a cash swap program nationwide to enable those in the unbanked areas to exchange their old notes for new notes before the deadline.

However, the House of Representatives, the Senate, and the Nigeria Governors’ Forum have asked the CBN to extend the date to enable more Nigerians to get the new notes.

CBN increases benchmark interest rate to 17.5%

 

 

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