THE Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), on Tuesday, raised the bench- mark lending rate by 400 basis points (bps) to 22.75 per cent from 18.5 per cent, in its efforts to aggressively contain the rapidly-rising inflation in the economy.
But economic experts have described the development as an overkill and a huge constraint on commercial banks to support the economy.
Nonetheless, the MPC also increased the asymmetric corridor to +100bps/- 700bps from the initial +100bps/-300bps. Also increased was the Cash Reserve Requirement (CRR) from 32.5 per cent to 45.0 percent while it retained a liquidity rate at 30 percent.
The CBN Governor, Olayemi Cardoso made these disclosures at the MPC briefing on Tuesday.
Explaining the motive for the hawkish stance, Cardoso said MPC members were concerned about the persistent rise in the level of inflation and emphasized the commitment to reverse the trend.
“Previous policy rate hikes have slowed the rise in inflationary pressure but not to a desirable extent.
Members concluded that inflation could pose more regulatory challenges in the near and medium term if not effectively anchored”, he said.
According to him, non-monetary factors were driving inflation, adding, “we are out to tighten money supply and have a robust strategy in place to rein in inflation. We
expect that this decision will have an effect in the short to medium term. We are working with the fiscal authorities to tackle the soaring inflation so that the other side of inflation that is not within our control, can be managed better”.
On how much of FX back- logs have been cleared by the apex bank, Cardoso revealed that the CBN, yester- day paid out $400 million to identified and genuine FX requests.
“We are committed to clearing backlogs of identified and genuine requests that are pending. We want to continue to do so. FX reserves have gone up in the last few years and it is currently at $34 billion”, Cardoso stated.
He further revealed that the CBN was doing all it can to track illicit flows of FX via a number of existing collaborations.
According to him, the collaboration with the Securities and Exchange Commission (SEC), Economic and Financial Crimes Commission (EFCC) and other regulatory bodies has confirmed
its fears on the rising amount of illicit FX flows. “We are concerned that certain practices have gone on in these entities like Binance and the rest. For example, in the last one year, about $26 billion passed through Binance via sources that cannot be identified.
Hence, we are engaging with a number of collaborations with the EFCC, SEC, Police and other bodies.