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Raising MPR to 22.5% good for economy, Moghalu backs CBN

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Raising MPR to 22.5% good for economy, Moghalu backs CBN

A professor of Economics, Kingsley Moghalu, has described the raising of the Monetary Policy Rate (MPR) by 400 basis points to 22.75 percent from 18.75 percent, by the Central Bank of Nigeria (CBN) as a necessary move to tame the inflation ravaging the economy.

Moghalu, a former Deputy Governor of the apex bank gave this commendation in a statement via his X handle on Tuesday.

He wrote, “Correct move by @cenbank Monetary Policy Committee to dramatically hike the Monetary Policy Rate by 400 basis point to 22.5 %. The situation calls for nothing less if we are to check inflation over 12-18 months. We did the same a decade ago to bring inflation from 14% to 8%.

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“It will hit businesses hard, but inflation is hitting harder. We must slay the inflation dragon lest it consume our economy and we head to Zimbabwe/Venezuela. The money supply MUST be reduced. Price stability must take priority before economic growth in the current situation.”

The CBN had on Tuesday raised the benchmark interest rate to 22.75 per cent amid soaring inflation.

The apex bank made this known after the two-day Monetary Policy Committee (MPC) meeting held between Monday and Tuesday.

According to the National Bureau of Statistics (NBS), the country’s annual inflation rate jumped to 29.90 per cent in January from 28.92 per cent in December 2023, primarily fueled by a continuous surge in food prices.

The new rate surpassed all projections by financial experts.

According to a Reuters’ poll released on Friday, Nigeria is expected to implement two aggressive interest rate hikes in less than two months to control inflation and strengthen the naira, following a few missed monetary policy sessions

It said the policy rate is expected to increase by 225 basis points to 21.00 per cent despite the local currency still trading near its record low on the black market.

In 2023, Nigeria’s MPC implemented a strategy of gradually increasing the MPR over four consecutive meetings.

Other important indices, such as the Cash Reserves Ratio (CRR) and Liquidity Ratio, stayed constant throughout the time at 32.5 percent and 30.0 percent respectively.

 

 

 

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