CBN lowers interest rate to 23%

The Central Bank of Nigeria (CBN) has reduced the benchmark interest rate to 23 percent.

CBN Governor Olayemi Cardoso shared this news after the bank’s two-day, 307th Monetary Policy Committee (MPC) meeting in Abuja on September 21 and 22.

This change follows two times when the Monetary Policy Rate (MPR) was kept at 26.5 percent in May and July. Before that, there was a 50-basis-point cut in February from 27 percent.

After the meeting, the CBN Governor explained that the committee decided to reset the MPR and adjust the policy corridor. This is part of an effort to improve how monetary policy works.

“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 stated.

The MPC also changed the asymmetric facilities corridor around the MPR to +50/-300 basis points. This aims to discourage banks from holding idle funds with the CBN and encourage them to lend more into the economy.

Additionally, the committee kept the Cash Reserve Ratio (CRR) for commercial banks at 45 percent. The rate for merchant banks remains at 16 percent, while the CRR on non-TSA public-sector deposits stays at 75 percent to manage liquidity.

CBN cut the interest rate as part of its efforts to control Nigeria’s headline inflation.

Since the CBN maintained the rate in May, inflation pressures have generally lessened. In August, headline inflation was at 15.39 percent, down from 15.43 percent in July, 15.91 percent in June, and 15.93 percent in May, according to the National Bureau of Statistics (NBS).

The rise in inflation seen in April was linked to the Middle East conflict that started in February, which led to higher global oil prices.

But even with the recent drop in inflation, the CBN’s decision comes as fuel prices have risen again across the country. This situation could lead to higher prices for goods and services.