Policy-setting committee of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which measures interest rate, from 15.1 percent to 16.5 percent to tame rising inflation.

Last week, Nigeria’s inflation rate reached a five-year high at 21.09 percent amid soaring food prices.

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.

Addressing journalists on Tuesday after the committee’s meeting at the CBN headquarters in Abuja, Godwin Emefiele, governor of the apex bank, said the hike in interest rate would continue to help tame rising inflation.

The committee also retained the cash reserve ratio (CRR) at 32.5 percent and retained the liquidity ratio at 30 percent.

CRR is the share of a bank’s total customer deposit that must be kept with the central bank in the form of liquid cash.

According to Emefiele, at this time of high inflation loosening it “would greatly jeopardise the gains of previous policy rate hikes”.

He said due to all the causative factors such as Russia-Ukraine war, supply chain disruptions, the slowdown in China, rising inflation in advanced economies, and other headwinds, it became dominant that a loosening option was not desirable at this meeting.

“With a rise in inflation, loosening the stance of policy will lead to a more aggressive rise in inflation and will erode the gain already achieved through tightening as regards whether to hold MPC was of the view that they won’t stand at the period close to December festive and expected heavy spending during 2023 general election,” Emefiele said.

“MPC decided to continue to tighten, but at a somewhat more moderated rate, noting that tightening the stance of policy would narrow the negative real effective interest rate margin and force improve market sentiment and further restore investors confidence.”

Emefiele further said the continuous tightening has yielded many results.

“The committee uses the opportunity to appraise the efficacy of its decisions at the last meetings and came up with the conclusion that the decisions were beginning to yield the desired results, given that the rate of increase in inflation was beginning to moderate your view of the month or more deceleration and prices presented by the NBS consumer price indices,” he added

“Members noted that though the global economy was progressively weakening due to the various headwinds, the recovery domestic output growth remained positive as a result of the continued support from fiscal and monetary policy.

The apex bank governor, therefore, urged authorities to continue to harmonise its various policies to achieve the desired objectives of stable prices and steady growth.

The Cable