Tue, 06 Dec 2022

ABUJA, Nov. 22 (Xinhua) -- Nigeria's apex bank on Tuesday raised the country's monetary policy rate to 16.5 percent, up from 15.5 percent, saying the move was deliberate in the quest to avoid a deeper inflation trap.

Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), told reporters in the capital, Abuja, after a two-day meeting of the country's monetary policy committee, that the option to continue tightening the interest rate, though, at a somewhat moderated rate, was considered to tame Nigeria's rising inflation.

"Loosening option was not desirable at this meeting. The committee also felt that, with the rising inflation, loosening the stance of policy will lead to a more aggressive rise in inflation," Emefiele said.

As part of its monetary policy stance, the CBN also retained the cash reserve ratio at 32.5 percent, as well as the liquidity ratio of 30 percent.

According to the CBN governor, in reaching the decision, the monetary policy committee felt that all the causative factors in the economy, like the Russian-Ukraine war and supply chain disruption were still dominant.

Likewise, he said the committee held the view that the fast-approaching Yuletide season, as well as early next year's general elections, would attract heavy spending, thereby jeopardizing some of the gains so far recorded by previously tightening the policy rates.

"The option to loosen was not considered... It would plunge the economy deeper into the inflation trap," Emefiele noted.

Nigeria's inflation rate rose to 20.52 percent in August, the highest since September 2005, according to data released in September by the government statistics agency.

The tightening of the interest rate on Tuesday was the third in the past four months. In July, the CBN raised the policy rate from 13 percent to 14 percent, and later to 15.5 percent in September.

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