Monetary Policy Review – MPC Raises Interest Rate to 15.00%

On September 27, 2022, the Monetary Policy Committee (MPC) concluded its fifth meeting of the year and decided to raise the benchmark interest rate by 150 basis points (bps) to 15.50% and the Cash Reserve Ratio (CRR) by 500 basis points (bps) to 32.50% while maintaining all other policy parameters at their current levels.

The decision took into account the shaky growth and ongoing increase in the inflation rate. In August 2022, headline inflation in Nigeria increased from 19.64% to 20.52%, the highest amount in 17 years.

Specifically, the committee:

  1. Raised the Monetary Policy Rate (MPR) to 15.50%.
  2. Increased the Cash Reserve Ratio (CRR) 32.50%.
  3. Held the Asymmetric corridor around the MPR at +100/-700bps.
  4. Held the Liquidity Ratio (LR) at 30.0%.

The CBN increased the MPR by a total of 400 basis points in 2022 in an effort to curb inflation. At its meeting in May 2022, the CBN raised its benchmark interest rate for the first time in six years by 150 basis points, to 13.00%. Then, in July, it raised it by a further 100 basis points to 14.00%. Also, the consensus of market watchers is that the three consecutive increments would help entice foreign investment and relieve pressure on the naira.