Breaking: CBN Hikes Nigeria's Interest Rate to 27.25% Amid Inflation Concerns

Central Bank of Nigeria's Latest Move

The Central Bank of Nigeria, or CBN, has made headlines again by increasing the interest rate by 50 basis points to 27.25%. This marks the fifth consecutive hike since February 2024. CBN Governor Olayemi Cardoso disclosed this significant decision during the briefing following the 297th Monetary Policy Committee meeting held in Abuja on Tuesday.

Key Financial Adjustments

Alongside the interest rate hike, the CBN announced a rise in the Cash Reserve Ratio (CRR) by 50 basis points from 45% to 50% for Deposit Money Banks (DMBs) and from 14% to 16% for Merchant Banks. Notably, the Liquidity Ratio (LR) remains at 30%, and the Asymmetric Corridor is set at +500/-100 basis points around the Monetary Policy Rate (MPR).

Economic Context

These measures come as Nigeria’s inflation rate showed signs of easing for the second consecutive month, dropping to 32.15% in August, according to the National Bureau of Statistics (NBS). Just five days prior, the U.S. Federal Reserve announced a significant 0.5% interest rate cut, marking a notable shift in economic policy.

Market Reactions and Future Prospects

Prominent economist and Executive Director of the Centre for the Promotion of Private Enterprise, Muda Yusuf, had previously urged the CBN to consider pausing further interest rate hikes amid these developments. Since February 2024, the CBN has enacted four rate increases, escalating from 22.75% to the current 27.25%. This rapid escalation of rates stands in stark contrast to the interest rate of 18.75% prior to Cardoso’s appointment in September last year.