The Central Bank of Nigeria (CBN) has increased the interest rate by 150 basis points, raising it from 24.75% to 26.25%. This decision was made during the bank’s Monetary Policy Committee (MPC) meeting held on May 20-21, 2024. The move marks the third consecutive hike aimed at addressing the country’s escalating inflation, which reached 33.69% in April 2024.

CBN Governor Yemi Cardoso, who also serves as the MPC chairman, announced the decision, emphasizing the need to stabilize prices amidst rising inflationary pressures. “The key focus of the MPC meeting was to achieve price stability by using tools available to rein in inflation,” Cardoso stated.

In addition to the rate hike, the MPC retained the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) at 45% and kept the Asymmetric Corridor around the MPR at +100 and –300 basis points. The liquidity ratio was also maintained at 30%.

Cardoso highlighted that food inflation is a significant driver of the overall inflation rate, influenced by factors such as increased transportation costs, infrastructure challenges, security issues, and exchange rate fluctuations. The inflation surge is largely attributed to last year’s removal of the fuel subsidy and the floating of the naira, leading to higher living costs for Nigerians.

Despite ongoing protests and pressure from labor unions, President Bola Tinubu has urged for patience, expressing optimism that the government’s economic reforms will eventually bear fruit. In response to the falling value of the naira, the CBN has also targeted operations of cryptocurrency exchanges like Binance in recent months.