On Tuesday, March 21st, 2023, the Central Bank of Nigeria (CBN) announced its decision to increase the Monetary Policy Rate (MPR) by 50 basis points from 17.5% to 18%. The MPR is the rate at which the CBN lends to commercial banks and sets the benchmark for other lending rates in the country.
The decision was made at the end of the CBN Monetary Policy Committee (MPC) meeting, where members assessed the current state of the economy and concluded that the increase in MPR would help to curb inflationary pressures and stabilize the exchange rate.
In addition, the CBN retained the Cash Reserve Ratio (CRR) at 32.5%, the Liquidity Ratio (LR) at 30.0%, and the Asymmetry Corridor at +100/-700 basis points around the MPR. The CRR is the percentage of deposits that banks are required to hold with the CBN, while the LR refers to the amount of liquid assets that banks must hold.
According to the CBN Governor, Godwin Emefiele, the decision to raise the MPR was a necessary step to address the rising inflationary pressures in the economy, which had been fueled by factors such as the depreciation of the naira, high food prices, and supply chain disruptions.
He further stated that the CBN remained committed to its mandate of maintaining price stability and ensuring that the Nigerian economy remained on a path of sustainable growth and development.
The decision of the CBN to raise the MPR is expected to have an impact on borrowing costs for individuals and businesses in the country, as well as on the overall direction of the economy. It remains to be seen how the Nigerian financial markets will react to this decision in the coming days and weeks.
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