CBN raises interest rate for fifth time, now 17.5%

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  • January deadline for exchange of new note sacrosanct

BY FESTUS OKOROMADU

Uba Group

The Central Bank of Nigeria on Tuesday announced a 100 basis points increase in the country’s Monetary Policy Rate to 17.5% in order to curb inflation.

The MPR, which measures interest rate, was raised from 16.5% to 17.5% even as the inflation rate fell from 21.47% to 21.34% in December, 2022.

The CBN Governor, Godwin Emefiele, disclosed this while addressing journalists on the outcome of a two-day meeting of its Monetary Policy Committee MPC in Abuja.

Although the latest increase is the fifth in recent times, CBN insisted that the previous move was beginning to yield results attributing such to the decline in inflation rate reported in December.

The CBN Governor explained that loosening the rate would negate the objective of damping pent-up aggregate demand which fuelled inflation.

On how the committee arrived at the decision to raise MPR, he said, “One member voted to increase the MPR by 150 basis points, four members by 50 basis points and seven members by 100 basis points. In summary, MPC voted to raise MPR to 17.5%.”

Emefiele stressed that there was a need to keep tightening its fiscal policy, adding that the committee also voted to keep the asymmetric corridor at +100 and -700 basis points around MPR, Cash Reserve Ratio at 32.5% and Liquidity Ratio at 30%.

Answering questions on the January 31 deadline for the phasing out of old naira notes, Emefiele insisted that the date remains sacrosanct.

He insisted that the time given for the deposit of the old naira notes was enough for Nigerians to go to commercial banks and get new notes.

“I don’t have good news for those who feel we should shift the deadline; my apologies.

“The reason is because 90 days should be enough for those who have the old currency to deposit it in the banks,” he said.

Meanwhile, the two arms of the National Assembly on Tuesday called on the CBN Governor to extend the deadline to July.

The resolution calling for the extension was passed on the floor of the Senate and House of Representatives.

The Red Chamber had in December 2022 directed the CBN to extend the deadline but the regulator has continued to resist the move.

The development seems to have been causing panic in many parts of the country as the deadline draws nearer, with speculations that thousands, especially those in rural areas are still unable to exchange the old notes for new ones.

Senators, during debate on a motion sponsored by Sadiq Suleiman Umar (APC, Kwara) at Tuesday’s plenary, said the new notes were not enough in circulation, warning that if the deadline was not extended, there would be chaos in many parts of the country.

The lawmakers also expressed dismay that the CBN had insisted on the January 31 deadline despite huge public outcries.

“CBN"

The Senate, therefore, asked the CBN to extend the deadline by six months to allow Nigerians especially those in rural areas more time to change their old notes.

The Red Chamber also urged the CBN to compel commercial banks to open naira exchange windows for those without bank accounts to exchange their old naira notes.

Senate President, Ahmad Lawan, assured that the National Assembly leadership would ensure that the resolution is implemented by the CBN.