Central Bank of Nigeria Raises Monetary Policy Rate by 400 Basis Points to 22.75%

The Central Bank of Nigeria raised its benchmark Monetary Policy Rate by 400 basis points to 22.75% on Tuesday, taking it to a record high, in the first rate decision of Governor Olayemi Cardoso's newly reconstituted Monetary Policy Committee.

Announcing the decision after a two-day meeting in Abuja, Cardoso said all twelve members of the Committee had voted unanimously to raise the MPR from 18.75%, where it had been since July 2023. The Committee also raised the Cash Reserve Ratio to 45% from 32.5%, retained the liquidity ratio at 30% and widened the asymmetric corridor around the MPR to +100 and -700 basis points, from +100 and -300 previously.

FIRST MPC MEETING UNDER NEW COMMITTEE

The decision marks the first MPC meeting of 2024 and the first since the Committee was reconstituted, with the Senate confirming Cardoso and eleven other members on 22 February, days before this week's sitting. It is also the first rate action under Cardoso, who became CBN Governor in September 2023 but had been unable to convene a quorate MPC meeting for most of his tenure, leaving the benchmark rate on hold for seven months despite accelerating inflation.

INFLATION AT NEAR-THREE-DECADE HIGH

Cardoso said the Committee's decision had been driven by the urgent need to address unrelenting inflationary pressures, persistent exchange-rate volatility and rising inflation expectations. Headline inflation stood at 29.90% in January, a near-three-decade high, driven by the mid-2023 removal of the petrol subsidy and the depreciation of the naira following the unification of the country's exchange-rate windows in June. Broad money supply stood at ₦93.72 trillion at the end of January.

"Previous policy rate hikes have slowed the rise in inflationary pressure but not to a desirable extent," Cardoso said.

CASH RESERVE RATIO AND CORRIDOR

The Cash Reserve Ratio was raised to 45% from 32.5%. By widening the asymmetric corridor to -700 basis points, the CBN has also effectively cut the rate at which it remunerates banks' standing deposits to 15.75%.

NEXT MEETING ON 25–26 MARCH

The Committee will meet again on 25–26 March, in line with the 2024 MPC calendar published in January.