CBN Increases Interest Rate to Borrow Money as Access, Zenith, UBA, Others Get Ready to Comply
- The Central Bank of Nigeria has increased the country’s lending rates during its Monetary Policy Committee meeting
- The Monetary Policy Committee of the bank increased the lending rates from 26.25% to 26.75%
- Analysts have said the consistent increase in MPR is a disincentive to investors and investment
Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.
The Monetary Policy Committee Meeting of the Central Bank of Nigeria (CBN) has increased the Monetary Policy Rate (MPR) by 50 basis points from 26.25% to 26.75%.
Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN), said the continuous increase in interest rates was based on the rise in food and core inflation.
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Inflation rate forces interest rate hike
He called on fiscal authorities to address inflationary pressures on the economy.
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The CBN adjusted the asymmetric corridor around the MPR from +100/-300 to +500/-100 basis point.
Reports say the MPC left commercial banks' cash reserve ratio (CRR) and liquidity ratio at the same rate.
The MPC stated that the persistent food and energy inflation has piled enormous pressure on the economy and Nigerians.
The CBN boss disclosed that the food crisis in Nigeria has affected the prices of other items.
Nigeria’s inflation rate surges
The National Bureau of Statistics said that Nigeria’s June inflation rose to 34.19%, which analysts say is the highest in 17 years.
According to reports, Nigeria’s food inflation rose to about 40.87% compared to the 40.66% recorded in May 2024, representing 15.62% higher than the rate of 25.25% recorded in June 2023.
Food inflation in June 2024 rose to 2.55% monthly, a 0.26% increase from the 2.28% recorded in May 2024.
Dangote, other analysts condemn rate hikes
Aliko Dangote, president of Dangote Industries Limited, said the continuous increase in interest will disincentivize investors.
Dangote said no investor will come into an economy with an interest rate as high as 30%.
Analysts asked the CBN to halt further increases in interest rates to protect naira.
Financial analyst and banker Ikem Nwachukwu disclosed that the hike in interest is not just a disincentive but a joy killer in other sectors.
He disclosed that manufacturing costs will increase as banks increase lending rates.
“Manufacturers will increase their costs because they consider interest rate as an input cost. While the rate hike is a buffer against inflation, it is also a significant discouragement to investors and investments.
“The cost of borrowing will increase, leading to the cost of goods and services as manufacturers seek to recoup costs.”
CBN to make changes on interest rates on savings accounts
Legit.ng earlier reported that the governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has said the bank would extend its monetary tightening position to control inflation.
The CBN boss said this in a recently published debut outlook, stating that the move is to mitigate some risks and address existing imbalances.
Some of the risks he cited included heightened inflation due to long-standing structural imbalances, which would extend monetary tightening and depressed growth forecasts.
Proofreading by Nkem Ikeke, journalist and copy editor at Legit.ng.
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Source: Legit.ng
