The Central Bank of Nigeria (CNN) in a final bid to fight inflation rates for 2022 on Tuesday raised interest rates to 16.5 per cent.
While reading the communique of the last Monetary Policy Committee (MPC) meeting of the year on Tuesday, CBN governor, Godwin Emefiele said MPC members voted to increase the benchmark interest rate (MPR) by 100 basis points to 16.5 per cent, the highest level since 2001.
During the meeting, the MPC noted that the tightening will help restore investors’ confidence whilst curbing higher rate of inflation.
Similarly, the Committee the asymmetric corridor of +100/-700 basis points around the MPR was retained, and CRR was retained at 32.5 per cent, while the Liquidity Ratio was also kept at 30 per cent.
Recall, that the apex bank had increased the MPR from 11.5 per cent earlier this year to 15.5 per cent across three consecutive rate hikes.
Nigeria’s inflation rate rose to 21.09 per cent in October 2022 from 20.77 per cent recorded in the previous month, an indication of a further rise in the cost of goods and services, despite the hawkish move by the CBN in the past six months.
Also as part of efforts to curb rising inflation, the CBN also announced plans to reduce the volume of N500 and N1000 notes in circulation “over time”.
Emefiele claimed the effort is aimed at curbing the inflation rate which he partly blamed on the higher-denominated naira notes.
He started by using the UK as an example; “In the UK they have a denomination of 50 pounds but the most spent denomination is 20 pounds. Nobody spends 50 pounds. If you go around carrying 50 pounds in the UK they will suspect you in fact.”
And then compared this with Nigeria…“The reverse is what is happening in Nigeria. Nigerians want to carry N500 and N1000. And in fact, we are beginning to think that increasing the high denomination is also part of what is fueling inflation. So in fact, yes we will launch N200, N500, and N1000 over time we will reduce the volume of N500 and N100o in circulation. Let people carry N50 around. “
“If you want to do high-value transactions, embrace online, embrace our agency programme and embrace our mobile banking programme that is what you need”