Nigerian Central Bank Hikes Key Interest Rate Just Days After Naira Plunges to New Low
Following the latest meeting of the monetary policy committee, the Central Bank of Nigeria says it has hiked the monetary policy rate to 15.5%. By increasing the key interest rate by 150 basis points, the central bank hopes to “narrow the negative real interest rate gap and rein in inflation.” The rate increase came just days after the naira’s parallel exchange rate against the dollar plunged to a new low. Narrowing the Negative Real Interest Rate Gap
According to the Central Bank of Nigeria (CBN), members of the bank’s monetary policy committee (MPC) have voted “unanimously to raise the policy rate to narrow the negative real interest rate gap and rein in inflation.” Following the vote, Nigeria’s key interest rate — the monetary policy rate (MPR) — now stands at 15.5%, up from 14%.
In a statement, the CBN said the decision to increase MPR by 150 basis points was made because members of the MPC felt that any attempt to loosen the policy rate would be detrimental. At this [MPC] meeting, the option to loosen the policy rate was not considered as this would be gravely detrimental to reining-in inflation … The Committee thus voted unanimously to raise the Monetary Policy Rate (MPR) and the Cash Reserve Requirement (CRR). Ten members voted to raise the MPR by 150 basis points, one member by 100 basis points, and another member by 50 basis points.
Nigeria’s inflation rate, which has now grown by 280 basis points in just four months, stood at 20.52% in August 2022. To stop it from growing further, the MPC said it is necessary for the CBN to ensure that “significant focus [is] be given to taming inflation.”
Meanwhile, the bank’s decision to hike the MPR came just days after the Nigerian currency’s exchange rate against the U.S. dollar plunged to a new all-time low. According to a Bloomberg report, the naira’s parallel market exchange rate had dropped from 715 naira for every dollar to 720 naira per dollar. On the formal market, one U.S. dollar was buying just under 440 naira.
Following the naira’s latest significant depreciation, the spread between the currency’s official and parallel market exchange rate has now widened to over 280 naira.
Register your email here to get a weekly update on African news sent to your inbox:
Tags in this story Black market exchange rate, Central Bank of Nigeria, inflation rate, monetary policy committee, monetary policy rate, MPC, naira depreciation, naira exchange rate
What are your thoughts on this story? Let us know what you think in the comments section below. Terence Zimwara
Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route. Report: Gap Between Ethiopian Currency"s Official and Parallel Market Exchange Rate Grows to New Record AFRICA | 4 days ago Kenyan Central Bank Says It"s "Craziness" to Convert Country"s Reserves to Bitcoin AFRICA | 4 days ago
Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleSettlements With China — Russia Plans Next Step for Digital Ruble Next articleStablecoin Economy Continues to Deflate — USDC’s Market Cap Shed $6.7 Billion in 83 Days Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItCentral Bank of Brazil Confirms It Will Run a Pilot Test for Its CBDC This Year
The Central Bank of Brazil has confirmed that the institution will run a pilot test regarding the implementation of its proposed central bank digital currency (CBDC), the digital real. Roberto Campos Neto, president of the bank, also stated that this ... read more.Draft Law Regulating Aspects of Crypto Taxation Submitted to Russian Parliament Fidelity Investments Launches Crypto, Metaverse ETFs — Says "We Continue to See Demand" Argentinian Securities Regulator Launches Innovation Hub to Discuss Regulated Crypto Investments Fed"s Bullard Wants to Raise Bank Rate to 3.5% by Year"s End, Hints at 75 Basis Point Rate Hike