By Melvin Onwubuke
The International Monetary Fund has supported the decision of the Monetary Policy Committee of the Central Bank of Nigeria to increase the benchmark borrowing rates by 400 basis points to 22.75 per cent from 18.75 per cent.
At its February meeting, the MPC said that inflation and exchange rate pressures have been key factors for a rise in MPR due to rising inflationary expectations, according to The Punch.
“Members were concerned about the persistent rise in the level of inflation and emphasized the committee’s commitment to reverse the trend as the balance of risk leaned towards rising inflation.
“The committee, however, acknowledged the trade-off between the pursuit of output growth and taming inflation but was convinced that an enduring output expansion is possible only in an environment of low and stable inflation,” the committee stated in its communiqué.
In a statement on Tuesday at the end of IMF staff visit to Nigeria, the fund said the decision by the MPC would help contain inflation and pressures on the naira.
Part of the statement said “The team welcomed the Monetary Policy Committee’s decision to further tighten monetary policy. The MPC increased the policy rate by 400 basis points to 22.75 per cent for a total tightening of 1,025 basis points since May 2022.This decision should help contain inflation, which reached 29.9 per cent year-on-year in January 2024, and pressures on the naira.”
The IMF delegation visited Lagos and Abuja February 12 to 23, 2024 for the purpose of discussing Article IV Consultations with Nigeria under the leadership of Mr. Axel Schimmelpfennig, Head of Mission at the International Monetary Fund in Nigeria.
