According to experts, the new CBN interest rate is going to raise inflation.
In order to combat inflation, the Central Bank of Nigeria (CBN) increased the Monetary Policy Rate from 17.5 percent to 18 percent.
Governor of the CBN Godwin Emefiele made this announcement following the CBN's Monetary Policy Committee meeting.
The MPR is the interest rate that the CBN assesses on commercial banks. It serves as a benchmark for lenders when figuring out the interest rates on loans that their customers take out. When the CBN increases MPR, banks raise their loan or debt interest rates.
According to Emefiele, the MPC's numerous interest rate increases have had a favorable effect on the inflation rate. He also stated that additional rate increases won't have an impact on Nigeria's banking sector and that lowering the interest rate will reverse the progress made thus far.
Emefiele claims that the MPC increased the interest rate to 18% as a result of a decision by 10 MPC members to increase the MPR by 50 basis points. The MPR was raised by 35 basis points thanks to one member's vote.
Emefiele gave the following explanation for the rate increase: "MPC reviewed the potential effects of additional policy rate hikes on the stability of the banking system and was convinced that more rate hikes would not adversely damage the stability of the banking sector.
"The committee, however, urged the bank's administration to step up its regulatory control of the banking system in order to guarantee the stability and toughness of the banking sector.
"The committee's discussion at this meeting consequently focused on whether to keep raising rates to slow the trajectory of increasing inflation or to wait to watch for new information and give the economy time to adjust to the previous five rate hikes. Losing the members' (MPC) point of view will seriously jeopardize the progress made thus far.
"MPC observed the sustained upward risk to price development surrounding anticipation of the PMS (Premium Motor Spirit) subsidy being removed, rising prices of other energy sources, ongoing exchange rate pressure, and uncertain climatic conditions," the report stated.