The Central Bank of Nigeria (CBN) says its Monetary Policy Committe (MPC) decision to increase Monetary Policy Rate (MPR) is to control rising inflation.
CBN’s director, Monetary Policy Department, Hassan Mahmoud, said this on Wednesday at a post-MPC briefing tagged: “Unveiling Facts behind the Figures’’.
The MPC, in its 287th meeting on Tuesday, increased the MPR by 150 basis points, from 14 to 15.5 per cent, as MPR is the baseline interest rate in an economy on which other interest rates within that economy are built on.
The CBN Governor, Mr. Godwin Emefiele, had said that the decision was informed by persistent rise in inflation rate and fragile economic growth.
According to Mahmud, the MPC got to a point where stringent measures had to be taken to control inflation. He said that the committee took cognisance of global and local economic issues in arriving at its policy decisions.
“We raised the MPR because it is necessary to do so. The quantity of money in the system was too much for the economy to absorb,’’ he said.
He said that monetary policy tools were meant to deal with short term risks, adding that the idea was to make cost of funds expensive to drive down inflation.
According to Mahmud, the stimuluses that governments across the world provided for their citizens during COVID-19 increased the ability of people to spend, thereby, creating challenges with global supply.
“A lot of households and small businesses were injected with stimuluses; the U.S did two trillion dollars, Nigeria did about five trillion Naira, these increased the ability of people to spend.
“But the supply side could not meet up with the demand because that volume of injection was far more than the regular intake for those economies, this made prices to go up,’’ he said.
He also blamed the Russian-Ukraine war and the resurgence of COVID-19 in China as responsible for rise in global inflationary trend.
“That region accounts for more than 50 per cent of global commodity supply and 38 per cent of global oil and gas supply.
“The war resulted to some shortages which made prices to go up. Then the COVID-19 lockdown in China. The country is the largest importer of commodities across the globe,’’ he said.
Speaking on the various economic intervention initiatives by the apex bank and the prospect of recouping the funds, Director, Development Finance Department, Dr. Yusuf Yila, said about nine trillion Naira has been invested in the various development finance interventions.