The Central Bank of Nigeria on Wednesday disclosed that the Monetary Policy Rate was increased by its Monetary Policy Committee in order to control the rising inflation.
According to The PUNCH, this was disclosed by the CBN’s Director, Monetary Policy Department, Hassan Mahmoud at a post-MPC briefing tagged: “Unveiling Facts behind the Figures’’.
The MPC had raised the MPR by 150 basis points, or from 14% to 15.5%, at its 287th meeting on Tuesday.
The MPR serves as the foundational interest rate for an economy, upon which all other interest rates are based.
The CBN Governor, Godwin Emefiele, had said that the decision was influenced by the persistent rise in inflation and the fragile state of the economy.
Reiterating the position of the CBN boss, Mahmoud explained that the MPC has reached a point where it needs to take strict steps to stop inflation.
He said that the committee’s policy decisions were based on both global and local economic issues.
“We raised the MPR because it is necessary to do so. The quantity of money in the system was too much for the economy to absorb,’’ he said.
He added that the purpose of using monetary policy tools to address short-term risks was to raise the cost of borrowing in order to reduce inflation.
According to Mahmud, the stimulus packages provided by governments around the world to their citizens during COVID-19 increased the capacity of individuals to spend, thereby posing problems for global supply.
“A lot of households and small businesses were injected with stimuluses; the U.S did two trillion dollars, Nigeria did about five trillion Naira, these increased the ability of people to spend.
“But the supply side could not meet up with the demand because that volume of injection was far more than the regular intake for those economies, this made prices go up,’’ he said.
He also blamed the Russian-Ukrainian conflict and the resurgence of COVID-19 in China for the global inflationary trend upwards.
“That region accounts for more than 50 per cent of global commodity supply and 38 per cent of global oil and gas supply.
“The war resulted in some shortages which made prices go up.’