Breaking: CBN Hikes Interest Rate To 27.25%, Stirs Credit Worries

The Central Bank of Nigeria (CBN) has again raised the interest rate to 27:25 % and this leaves far-reaching implications for Nigerians.

The Eagle reports that though the interest rate, also called the Monetary Policy Rate (MPR), is a popular policy control measure of the CBN, but raising it makes credits taken by individual Nigerians and corporates more expensive to pay back.

This tends to keep them in debt squeeze, but the apex bank which announced its hike of the interest rate today during the Monetary Policy Committee (MPC) meeting, says the latest is in the overall interest of the economy.

The CBN governor, Mr Olayemi Cardoso, who chaired the meeting said  it would help to improve investor’s confidence and also enable planning from the medium to the long term.

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“The committee was, however, unanimous in recognising that a lot more is required to actualise the bank’s price stability mandate,” he noted.

“The MPC noted that even though headline inflation trended downwards due to a moderation in food inflation, core inflation has remained elevated, driven primarily by rising energy prices.

“The uptrend poses severe concerns to members as it clearly indicates the persistence of inflationary pressures. Members thus reiterated the need to work in close collaboration with the fiscal authority to address the current upward pressure on energy prices.

“The MPC noted the continued growth in money supply, recognising the need to curtail excess liquidity in the system as well as address foreign exchange demand pressures.”

According to the Central Bank of Nigeria’s (CBN) August 2024 Household Expectations Survey, 11.4% of respondents expressed the opinion that higher interest rates would provide economic benefits.

The Eagle reports that the August 2024 Household Expectations Survey carried out by the apex bank itself showed that Nigerians were opposed to interest rate hikes.

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As against 11.4% of respondents who expressed positive sentiments towards higher interest rates 67.4% of Nigerians believe that lowering interest rates would significantly improve the country’s economy.

The sample made its deductions from 1,665 households sampled from across the nation.

The said lower interest rates would be more beneficial for the economy, while 10.3% preferred no change at all.