The Monetary Policy Committee (MPC) of the Central Bank of Nigeria has voted to increase the benchmark interest rate (MPR) by 100 basis points to 16.5%, the highest level since 2001.
This was disclosed by the Governor of CBN, Godwin Emefiele, while reading the communique of the last MPC meeting of the year yesterday.
Nigeria’s inflation rate rose to 21.09% in October 2022 from 20.77% recorded in the previous month, an indication of a further rise in the cost of goods and services, despite the hawkish move by the CBN in the past six months.
During the meeting, the MPC noted that the tightening will help restore investors’ confidence whilst curbing higher rate of inflation.
The committee unanimously voted to increase MPR by 100 basis points to 16.5%. The asymmetric corridor of +100/-700 basis points around the MPR was retained. CRR was retained at 32.5%. While the Liquidity Ratio was also kept at 30%.
Recall, that the apex bank had increased the MPR from 11.5% earlier this year to 15.5% across three consecutive rate hikes.
To reduce volume of N500, N1,000 in circulation
Emefiele also announced that the apex bank is planning to reduce the volume of N500 and N1,000 notes in circulation over time.
Responding to questions about the ease of counterfeiting one thousand naira notes and if there are plans to reduce the volumes, Emefiele said: “In the UK their highest denomination is 50 pounds but the most spent denomination is 20 pounds. Nobody spends 50 pounds. If you go around carrying 50 pounds in the UK they will report you in fact.”
“The reverse is what is happening in Nigeria. Nigerians want to carry N500 and N1,000. And in fact, we are beginning to think that increasing the high denomination is also part of what is fueling inflation. So in fact, yes we will launch N200, N500, and N1,000 over time we will reduce the volume of N500 and N1,000 in circulation.
“If you want to do high-value transactions, embrace online, embrace our agency programme, embrace our mobile banking programme, that is what you need.”
Buhari to unveil new naira notes today
The CBN also confirmed that President Muhammadu Buhari will unveil the newly redesigned naira notes today .
The governor had earlier said the new notes (N200, N500 and N1,000) will be effective from mid-December 2022.
However, on Tuesday, Emefiele said the bank will no longer wait till December 15 to “unveil and release” the new note.
He said the unveiling will now be done today — 23 days earlier than the scheduled date — by the Buhari.
Emefiele’s comment follows calls for an extension of the December 15 deadline by various stakeholders across the country.
We said that upon release of the new currency, the legal tender status will run concurrently with the old currency till 31st January 2023. That is almost 100 days. 100 days is enough for any person in any part of Nigeria to deposit his money in the bank and get ready to withdraw cash when the new notes are released,” he said.
No plans to stop the Anchors Borrowers Programme
The CBN also dismissed claims that it plans to stop the Anchor Borrowers Programme (ABP).
Emefiele stated that the apex bank will instead take a more aggressive approach to help farmers survive the impact of the devastating flood across the country.
Responding to the question concerning programme, he said: “We are gradually moderating our intervention in developmental finance. But that doesn’t mean we are stopping, as some people have told you.”
The CBN has given a total of N1.01 trillion to over 4.21 million smallholder farmers producing 21 commodities across the country through the ABP.
After the Real Sector Facility, the ABP has the second-highest funding level. The total amount paid out to 426 projects nationwide through the Real Sector Support Facility (RSSF) to date is N2.10 trillion.
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