CBN raises benchmark interest rate to 12%

  The Monetary policy Committee of the Central Bank of Nigeria on Tuesday announced a tightening of the monetary policy stance by increasing the Monetary Policy Rate by 100 basis point from 11 per cent to 12 per cent.

It also increased the Cash Reserve Ratio by 250 basis points from 20 per cent to 22.5 per cent, while retaining the liquidity ratio at the rate of 30 per cent.

Addressing journalists shortly after the two-day MPC meeting held at the central bank headquarters in Abuja, the CBN Governor, Mr. Godwin Emefiele, said the committee expressed concern that the excess liquidity in the banking system was contributing to the current pressure in the foreign exchange market.

This, according to him, has a negative impact on consumer prices, with the inflation rate rising to its highest level in three years at 11.38 per cent.

The governor said at 11.38 per cent, the inflation rate had breached the CBN’s policy reference band of six per cent to nine per cent.He lamented that the challenges facing the economy were part of the reasons why businesses were currently finding it difficult to service their loan obligations to banks.

The development, according to him, has led to the resurgence of non-performing loan portfolio, with the banking sector recording about five per cent NPLs as against the three per cent recorded few months back.