The Governor of the Central Bank of Nigeria, CBN, Godwin Emefiele on Wednesday tried unsuccessfully to justify the latest hike in the Money Policy Rate, MPR, or interest rate to 18.5 percent.
The apex bank governor announced the increased at the end of the MPC meeting in Abuja.
The hike is the third this year after the bank voted to increase the benchmark interest rate by 50 basis points to 18 per cent in March this year.
Since Emefiele made the announcement, critics of the bank have criticised the government bank for trying to find a convenient way to deal with the problem of inflation in the country.
According to them, the CBN has increased the rate for seven straight months , yet inflation has spiralled, as the Nigeria Burdau of Statistics, NBS latest inflation rate stands at 22.5 percent, even as sector analysts insist that the NBS figure is conservative considering the high cost of goods and essential commodities in the country.
The decision to continue to hike interest rate repeatedly, according to experts in the sector, is a lazy attempt by the Emefiele -led bank to adress inflation problems in the country , while core issues pushing up inflation have been left unattended to.
Emefiele had while speaking to journalists in Abuja, the nation’s capital after the end of the two- day meeting, said the committee voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR.
He said the decision was taken to counter the high energy cost and challenges around the supply chain, among others, which are beyond the CBN control.
According to Emefiele, “Tightening would reduce pent up aggregate demand which had contributed to high inflation,” urging the federal government to deal with the fiscal aspect even as “the current trend in price development would continue to be monitored by the bank with greater collaboration with fiscal authority to address the drivers of inflation.”
Experts have however pointed out some issues which must be addressed by the government to curb the problem of rising inflation. They include forex scarcity which has drastically reduced the value of the naira; insecurity which has affected the supply of goods and commodities across the country, thus pushing up prices; multiple taxation; increase in the cost of transportation as a result of hike in the pump price of fuel, particularly diesel, amongst others.
There’s the possibility of another increase in Interest rate at the next MPC meeting in June, financial experts say, as the government try desperately to adress inflationary pressure on the economy.
