The Central Bank of Nigeria, CBN, on Tuesday, July 26, raised the Monetary Policy Rate, MPR, benchmark interest rate from 12 percent to 14 percent, in a bid to address the rising inflation rate in the country, thereby stabilising the Naira.
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The CBN Governor, Godwin Emefiele, who made this known to Journalists, after the MPC meeting said, “we voted to increase the MPR, interest rate, by 200 basic points, from 12 percent to 14 percent”.
The CBN Governor, also called on the President to fast-track the implementation of the 2016 budget, in order to ease the current pressure on the economy.
MPR, is the yardstick at which the CBN lends to commercial banks, and it has always been a key instrument in stabilising prices.
Some financial analysts such as Razia Khan, of Standard Chartered Bank, who reacted to the development said, “Given the cost-push nature of inflation in Nigeria, which largely stems from the shortage of foreign exchange, we believe that this was the right thing to have done.
“Today’s monetary policy decision, demonstrates a commitment to foreign exchange liberalisation, which alone will undo some of the bottlenecks that have contributed to inflation,” Khan said.
It could be recalled, that inflation hit an 11 year high of 16.5 percent in June, as prices of food stuffs jumped, after the government freed up the Naira currency in April, allowing it to plummet against the US dollar.
With the marginal hike in petrol, diesel and aviation fuel, Nigerians are presently struggling with the spiraling cost of living, most especially after the 67 percent hike in the price of petrol in April, and last month’s scrapping of the peg of the Naira exchange rate, from 197/199 to the dollar.
Currently in the parallel market, the Naira now trades at 370 to the dollar, while at the inter-bank rate, it goes for 300 to the dollar.
Post-Nigeria had reported that palpable fear gripped Nigerians, following the report from the International Monetary Fund, IMF, that the nation’s economy is going to contract by 1.8 percent this year, after a forecast of 2.3 percent expansion in April this year.
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With the significant drop in crude oil price at the international market, there are strong indications that the Federal Government might not be able to pay salaries in coming months.
According to statistics, the drop in Nigeria’s crude oil revenue in the first quarter of 2016, is put at N53.72 billion, which is higher than the total amount the nation lost in the whole of 2015 (N51.3 billion).
Aside that, the nation’s economic woes have been exacerbated by the sabotage of oil and gas facilities in the oil-producing South, by militants wanting self-determination for the delta region.
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