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The Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) increased the anchor interest rate by 50 basis points at its July 2024 meeting.

With the decision, the Monetary Policy Rate (MPR) increased to 26.75%.

The CBN, under the leadership of the current governor, Olayemi Cardoso, started a new cycle of interest rate hiking in February 2024 when the MPC raised interest rate from 18.75% to 22.75%. Two more rate increases at the MPC meetings in March and May saw the MPR at 26.25%.

In the communique at the end of its policy meeting in May, the CBN said its key focus “remained to achieve price stability by effectively using tools available to the monetary authority to rein in inflation.”

In February 2024, the inflation rate was 31.70%. The figure had increased to 34.2% in June as the country continued to witness increases in the general price levels.

The other decisions reached at the July 2024 MPC meeting, which concluded today, saw the asymmetric corridor adjusted to +500bps/-100bps from +100bps/-300bps; the cash reserve ratio retained at 45.0% and 14.0% for deposit money banks and merchant banks, respectively; and the liquidity ratio held at 30.0%.

Earlier this month, Bank of America (BoFA)’s global research unit said in its report that the policies of the CBN were attracting “hot money” back into the country. According to the report, more financial inflows should support the local currency’s stability for the next 12 months, with the naira projected to exchange at N1,400 to the US dollar by year-end.

BoFA observed that the CBN interest rate hikes were less and less with each meeting of the MPC. It, therefore, projected the CBN may extend the current cycle of rate increases with one more hike by 100bp, while also leaning towards a pause.

Mr. Cardoso said today that the MPC considered a pause or further hike of interest rate. “The balance of risks suggests further tightening of policy to build on the benefits accruing from the previous rate hikes,” he said.

Analysts believe the base effect is likely to moderate year-on-year inflation data in Nigeria from July 2024. Accordingly, the CBN was expected to maintain its hawkish monetary stance in the short term.