The Central Bank of Nigeria, CBN, on Tuesday, raised its benchmark lending rate by 1.5 per cent points to 15.50 per cent, its highest level since 2006 when the rate was introduced, in a bid to control inflation and ease pressure on the naira.
The CBN Governor, Godwin Emefiele at a news conference in Abuja, the nation’s capital said this decision was unanimously arrived at by members of the Monetary Policy Committee (MPC).
He said, “The MPC noted that a tight policy stance would help consolidate the impact of the last two policy rate hikes, which is already reflected in the slowing growth rate of the money supply”.
ALM recalls that Inflation rose in August to 20.52 per cent from 19.64 per cent in the previous month, the highest in 17 years. Naira weakened on Monday to N720 to one U.S. dollar at the parallel market, leaving the gap between the black market and the official market at more than 65 per cent, the highest in six years.
The central bank hopes raising rates will reduce the money supply in the economy and rein in inflation, but analysts say the move also faces the risk of slowing economic growth. A higher interest rate will raise the cost of borrowing for businesses and may make goods and services even more expensive.
However, this decision by the CBN’s Monetary Policy Committee (MPC) was the third time in a row the bank would raise its interest rate. The bank has this year alone raised the benchmark rate by four percentage points cumulatively.
