ABUJA, July 23 (Xinhua) — Nigeria’s central bank on Tuesday further raised the monetary policy rate by 50 basis points to 26.75 percent to tame the stubborn inflation in the most populous African country.
The move, which came two months after the interest rate was raised to 26.25 percent, was taken in consideration of the effect of rising prices on households and local businesses, and was one of the “necessary measures” to bring inflation under control, said Yemi Cardoso, governor of the Central Bank of Nigeria, who also chairs the Monetary Policy Committee.
“In its consideration, the committee noted the persistence of food inflation, which continues to undermine price stability. It was observed that while monetary policy has been moderating aggregate demand, rising food and energy costs continue to exert upward pressure on price development,” Cardoso told the media at the end of a meeting in the capital of Abuja.
Since the beginning of the year, the Nigerian apex bank has consistently raised the interest rate, as one of the measures to rein in the country’s persistent inflation rate, which rose to 34.19 percent in June. This measure has been criticized by some local experts who warned that the interest rate hike may “create a stagnant or sluggish economy for the country.”
The monetary policymakers retained the cash reserve ratio for commercial banks at 45 percent, and the cash reserve ratio for merchant banks at 14 percent. The liquidity ratio was maintained at 30 percent.
By taking these steps, the monetary policymakers remained optimistic that despite the June uptick in headline inflation, prices are expected to moderate soon, Cardoso said.
The prevailing insecurity in food-producing areas and the high cost of transportation of farm produce also contribute to the inflationary trend, according to Cardoso.
