Inflation has hit an all time 18 year high as the Central Bank of Nigeria announced an increase in its monetary policy rate to 18 per cent
The CBN governor, Godwin Emefiele disclosed this Tuesday, in Abuja at the end of the 290th Monetary Policy Committee (MPC) meeting.
Reports say that the apex bank embarked on further tightening of the monetary policies in a bid to curb inflation is at its highest in almost two decades.
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According to data published on the national bureau of statistics website, the inflation rate rose to 21.9% in February from 21.8% a month earlier.
This increase was attributed largely to a minimal rise in the food component to 24.35 per cent in February 2023, from 24.32 per cent in January 2023.
“The core component moderated to 18.84 per cent in February 2023 from 19.16 per cent in January 2023,” he said.
Emefiele said that the shocks to the food component of inflation were driven by high cost of transportation of food items.
He said that lingering security challenges in major food-producing areas and legacy infrastructural problems, which continue to hamper food supply logistics were also responsible.
“Broad money supply (M3) grew by 13.14 per cent in February 2023, below the 2023 provisional annual benchmark of 17.18 per cent.
“This was driven largely by the growth in Net Foreign Assets (NFA), which was attributed to the increase in foreign asset holdings of the CBN and decrease in foreign claims on Other Depository Corporations (ODCs).
“Money market rates reflected the tight liquidity conditions in the banking system.
At the last MPC meeting in January, the rate was increased by 100 basis points, from 16.5 per cent to 17.5 per cent.
According to Emefiele, 10 out of the 12 committee members present at the meeting voted for a moderate rise in the MPR.
The Asymmetric Corridor of +100/-500 basis points around the MPR, the Liquidity Ratio of 30 per cent and Cash Reserve Ratio (CRR) of 32.5 per cent were thus retained.
Emefiele said the committee at a point was undecided about whether to continue the rate hike in order to check inflation or to discontinue.
He said that the MPC also considered whether to hold the rate to observe emerging developments and allow for the impact of the last five rate hikes to permeate the economy.
“Loosening in the view of the committee members would undermine gains so far achieved.
“MPC observed the upward risk to price development and expectations of the removal of the Premium Motor Spirit (PMS) subsidy.
“These, in the view of members, provide a compelling argument for an upward adjustment of policy rate, albeit less aggressively,” he said.
He also said that the apex bank’s naira redesign and cash withdrawal policies had resulted in a sizable reduction in currency outside the banking system.
Overall, Emefiele gave a pass mark to the monetary policy tools of the CBN claiming that it was an improvement.