By Aaior K. Comfort

The Central Bank of Nigeria (CBN) has announced an increase in its Monetary Policy Rate (MPR), raising it to 27.25%. This decision was made during the Monetary Policy Committee (MPC) meeting held on Tuesday, chaired by CBN Governor Yemi Cardoso.

Cardoso emphasized that this adjustment aims to bolster confidence among economic agents, enabling them to plan for the medium to long term. “The committee was unanimous in recognizing that more actions are required to achieve the bank’s price stability mandate,” he stated.

Despite a downward trend in headline inflation attributed to a moderation in food prices, core inflation remains elevated due to rising energy costs. Cardoso expressed concern over persistent inflationary pressures, urging closer collaboration with fiscal authorities to mitigate the upward pressure on energy prices.

The MPC also acknowledged the continued growth in money supply, emphasizing the need to manage excess liquidity and address foreign exchange demand pressures. Cardoso highlighted concerns over the growing fiscal deficit but noted the federal government’s commitment to avoiding monetary financing.

Additionally, Cardoso praised the government’s efforts to stabilize food prices and expressed optimism that the operations of Dangote Petroleum Refinery will help moderate transportation costs. This development is expected to ease food price pressures in the short to medium term, reduce foreign exchange demand for imports of refined petroleum products, and positively impact the overall balance of payments.

In July 2024, the CBN raised its MPR by 800 basis points to 26.75%, marking a significant increase from the 13% rate set in May 2022.