CBN: Rewane Says Raising Interest Has Not Checkmated Inflation

On the back of the Central Bank of Nigeria, CBN increase of the interest rate, the Chief Executive Officer of Financial Derivative Company, Bismark Rewane says the apex bank has failed in its resolve to checkmate inflation. For the second time in two months, the apex bank raise the rate to 14 per cent from 11.5 per cent in April this year.

The interest rate is the benchmark used by commercial banks in the country to set their own interest rates.

The government bank Governor Godwin Emefiele disclosed after the end of the MPC monthly meeting on Tuesday that the rate has been increased from 13 per cent to 14 percent. All other parameters remained the same, the apex bank governor said.

According to him, “The committee resolved that the most rational policy option would be to further strengthen its tightening stance in order to effectively curtail the unabated rising trend of inflation.

“Members were conscious of the fact that output growth remained fragile. However, not curtailing inflation now could erode the monetary gains achieved in improving consumer purchasing power and thus worsen the poverty level for the vulnerable populace.”

He added that, “Committee thus vote unanimously to raise the Monetary Policy Rate (MPR). One member voted to increase the MPR by 150 basis points, six members by 100 basis points, one member by 75 basis points and three members by 50 basis points.

“Consequently, Committee resolved to increase the MPR by 100 basis points from 13 percent to 14 percent. In summary, MPC voted as follows:

“Increase MPR to 14% from 13, retain the Asymmetric Corridor at +100 and -700 basis points around the MPR, retain the CRR at 27.5 percent and retain liquidity ratio at 30 percent.”

The bank had last month moved the rate from 11.5 per cent, saying the action was needed to checkmate rising inflation in the country.

But Rewane said the move has failed to checkmate inflation. For instance, the inflation rate was 17 per cent in May when the interest rate was raised. It has now moved to 18. 6 per cent, according to figures obtained from the National Bureau of Statistics, NBS.

Speaking on a Channels Television News on Tuesday, Rewane said the general inflation rate was not affected as a result of CBN increase in interest rate last month, saying the effect on inflation still ‘remains flat’.

He said the CBN made the right decision to increase the rate having waited for 70 months to do so, saying the country must move with other countries which have also increased their interest rate, majorly due to the economic challenges rocking global economy as a result of the war between Russia and Ukraine.

He cited the rising price of diesel and floundering exchange rate as major drivers of inflation which must be looked into.

Meanwhile, the apex bank has warned politicians against illegal forex transaction to fund 2023 election, saying anyone caught will be severely punished.

“As for those who want to buy (sic) take naira from their account to buy dollars because of the election. I want to warn not advice that it is illegal to do so.

“Whereas it will sound more convenient to carry dollar because you could carry little dollars but with a lot of value in your pocket, but if the security agencies hold you, you know the implication of that,” Emefiele said.