Nigeria: CBN raises benchmark rate

The Central Bank of Nigeria's (CBN's) Monetary Policy Committee (MPC) has raised the Monetary Policy Rate (MPR), which is the benchmark interest rate for the country, by 25 basis points, to 6.5 percent from 6.25 percent. The bank explained that the increase in the benchmark rates was a proactive measure, aimed at hedging against inflationary trends and controlling excess liquidity in the system occasioned by spending on election campaigns, government spending and fund injections by the Asset Management Corporation of Nigeria (AMCON). AMCON is in the process of buying up all the non-performing loans and toxic assets of the rescued banks.

The MPC also raised the Cash Ratio Rate (CRR) from 1 per cent to 2 per cent, effective from 1st February, and the Liquidity Ratio (LR) by 500 basis points, from 25 per cent to 30 per cent, effective from 1st March.

CBN Governor Lamido Sanusi explained that the tightening measures to curb inflation were taken because the country's economy had underperformed despite the favourable conditions and notwithstanding recent stabilisation of price inflation.

Sanusi also seized the opportunity to reiterate his view that the payment of federal subsidies on petroleum products is unsustainable and a constraint on the development of the country's refineries.

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