The CBN governor Godwin Emefiele recently defended why the hike rates of its benchmark interest rate from 12% to 14%. He noted that it was done to give the daily falling Naira a lift and also tame inflation.
A report from Today.NG revealed that CBN governor Godwin Emefiele told reporters the monetary policy
committee which meets every two months “voted to increase the MPR
(interest rate) by 200 basic points from 12 percent to 14 percent.”
MPR is the benchmark rate at which the CBN lends to commercial banks and it has been a key instrument in stabilising prices.
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,” said Razia Khan of Standard Chartered Bank.
monetary policy decision demonstrates a commitment to foreign exchange
liberalisation, which alone will undo some of the bottlenecks that have
contributed to inflation,” Khan added.
Inflation hit an 11-year
high of 16.5 percent in June as prices of food and energy jumped after
the government freed up the naira currency in April, allowing it to
plummet against the US dollar.
are struggling with spiralling cost of living after a 67 percent hike
in the price of petrol in April and lastmonth’s scrapping of the peg of
the naira exchange rate at 197/199 to the dollar.
The naira now trades at around 370 to the dollar on the black market. The official rate is at about 300 to the dollar.
International Monetary Fund said last week it expected Nigeria’s
economy to contract by 1.8 percent in 2016 after having forecast a
2.3-percent expansion in April, but the finance Minister Kemi Adeosun
said there was nothing to worry about.
Nigeria, one of Africa’s
main oil producers, normally gets 70 percent of its revenue from oil
sales. But the global fall in crude prices since mid-2014 has left the
government cash-strapped and even unable to pay wages.