Naira falls as CBN continues rate hikes

The Central Bank of Nigeria (CBN) has raised its benchmark interest rate, known as the Monetary Policy Rate (MPR), for the fifth consecutive time to 17.5%.

The move is aimed at combating inflation and was announced by the Governor of the CBN, Godwin Emefiele, during a meeting of the bank’s policy-setting committee. Despite a slight decrease in inflation in December, the economy still faces a risk of high inflation, which could negatively impact the standard of living for Nigerians, said Emefiele.

The CBN Governor also announced that the committee voted to retain the asymmetric corridor at +100 and -700 basis points around the MPR, as well as keeping the cash reserve ratio and liquidity ratio at 32.5% and 30%, respectively. Analysts have generally welcomed the move, stating that it is a necessary step in addressing the country’s inflationary pressures.

However, some have warned that the hike in interest rates could also slow down economic growth, which has already been affected by the COVID-19 pandemic.

As a result of the rate hike, the Naira, Nigeria’s currency, fell by 0.08% against the dollar at the official market. At the parallel market, also known as the black market, the Naira closed at N748 per dollar, the same rate it closed on the previous day.

The level of activities at the official foreign exchange market also increased, with the daily turnover rising by 15.73% to $112.04 million on Tuesday from $96.81 million recorded on Friday of the previous week.