The Central Bank of Nigeria (CBN) has raised its Monetary Policy Rate (MPR) by 50 basis points to 27.25%, marking the fifth consecutive rate hike this year.
This decision was made during the 297th meeting of the Monetary Policy Committee (MPC) held on September 23-24, 2024.
The MPC noted the moderation in headline inflation year-on-year in July and August 2024, driven by a decline in food inflation.
However, core inflation remains elevated due to rising energy prices, posing severe concerns to the Committee. The MPC emphasized the need to work closely with the fiscal authority to address the upward pressure on energy prices. They also recognized the growth in money supply and the need to curtail excess liquidity in the system.
The National Bureau of Statistics reported a moderation in headline inflation to 32.15% in August 2024. Real GDP grew by 3.19% in the second quarter of 2024, driven by both oil and non-oil sectors. Staff forecasts indicate the economy will grow by 3.32% in 2024.
The Committee observed a strong correlation between FAAC releases and liquidity levels in the banking system, as well as its impact on the exchange rate. To address this, they agreed to increase monitoring of future releases.
The MPC applauded the Federal Government’s efforts to address insecurity in farming communities and bridge the food supply deficit through duty-free import windows.
Despite the banking industry’s stability, the Committee stressed the need for sustained supervisory oversight. They opted to tighten policy further to safeguard the gains in moderating inflationary pressure. The real policy rate remains negative, and achieving a positive real interest rate is crucial to attract investments and improve the exchange rate.
The CBN’s decision aims to curb inflationary pressures, stabilize the exchange rate, and safeguard the banking system while shielding the recovery of output growth. The next MPC meeting is scheduled for November 25-26, 2024.
Key Decisions of the MPC:
*Raise the MPR by 50 basis points to 27.25%
*Retain the asymmetric corridor around the MPR at +500/-100 basis points
*Raise the Cash Reserve Ratio of
*Deposit Money Banks by 500 basis points to 50.00%
*Retain the Liquidity Ratio at 30.00%.
Key Economic Indicators:
*Headline Inflation:_ 32.15% in August 2024, down from 33.40% in July
*Food Inflation:_ 37.52% in August 2024, down from 39.53% in July
*Real GDP Growth:_ 3.19% in the second quarter of 2024, up from 2.98% in the first quarter
*External Reserve:_ $39.07 billion as of September 19, 2024, representing 8 months of import cover.
Again, CBN Hikes Monetary Policy Rate to 27.25%
