CBN cuts interest rate to 23%

The Central Bank of Nigeria (CBN) has cut the benchmark interest rate to 23 per cent.

CBN Governor Olayemi Cardoso disclosed the committee’s decision at the conclusion of the bank’s two-day, 307th Monetary Policy Committee (MPC) meeting, held from 21 to 22 September in Abuja.

This decision followed two consecutive retention of the Monetary Policy Rate (MPR) at 26.5 per cent, holding it in May and July previously, following a 50-basis-point reduction in February from 27 per cent.

Speaking after the meeting, the CBN Governor stated that the committee decided to reset the MPR and recalibrate the policy corridor as an important operational realignment aimed at strengthening monetary policy transmission.

“The committee decided to reset the MPR and recalibrate the policy corridor as an important operational realignment aimed at strengthening monetary policy transmission and reinforcing the primacy of the monetary policy rate.

“It emphasised that the recalibration of the corridor does not constitute a change in the current monetary policy stance, but rather an operational reset to enhance the effectiveness of monetary policy and support the transition to an inflation targeting framework,” CBN said.

The MPC also adjusted the asymmetric facilities corridor around the MPR to +50/-300 basis points, a move aimed at discouraging banks from keeping idle funds with the CBN and encouraging increased lending into the economy.

Furthermore, the committee maintained the Cash Reserve Ratio (CRR) for commercial banks at 45 per cent, retained the rate for merchant banks at 16 per cent, and kept the CRR on non-TSA public-sector deposits at 75 per cent for liquidity management considerations.

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CBN cut the interest rate amid its continued efforts to moderate Nigeria’s headline inflation.

Since CBN maintained the rate in May, inflationary pressure has generally eased, with headline inflation standing at 15.39 per cent in August, down from 15.43 per cent in July, 15.91 per cent in June and 15.93 per cent in May, according to the National Bureau of Statistics (NBS).

The rise in inflation recorded in April followed the escalation of the Middle East conflict, which began in February and contributed to higher global oil prices.

However, despite the recent easing in inflation, CBN’s decision comes amid a renewed increase in fuel prices across the country, a development that could put fresh upward pressure on the prices of goods and services.