CBN Governor Godwin Emefiele announced this on Tuesday during the 286th meeting of the Monetary Policy Committee held in Lagos.
According to him, it was the right option considering economic realities.
The committee resolved that the most rational policy option would be to further strengthen its tightening stance in order to effectively curtail the unabated rising trend of inflation,” Emefiele said.
“Members were conscious of the fact that output growth remained fragile. However, not curtailing inflation now could erode the monetary gains achieved in improving consumer purchasing power and thus worsen the poverty level for the vulnerable populace.”
The monetary policy rate (MPR) is the main interest rate in a country or economy on which all other interest rates in that economy are based.
While the apex bank increased the MPR rate, it, however, retained other parameters.
The asymmetric corridor remains +100 and -700 basis points around the MPR, and the well as Cash Reserved Ratio (CRR) at 27 percent.
He added, “Committee thus vote unanimously to raise the Monetary Policy Rate (MPR). One member voted to increase the MPR by 150 basis points, six members by 100 basis points, one member by 75 basis points and three members by 50 basis points.
“Consequently, Committee resolved to increase the MPR by 100 basis points from 13 percent to 14 percent. In summary, MPC voted as follows:
“Increase MPR to 14% from 13, retain the Asymmetric Corridor at +100 and -700 basis points around the MPR, retain the CRR at 27.5 percent and retain liquidity ratio at 30 percent.”
Tuesday’s rate hike marks the second time, the MPC will raise the interest rate in two months.
The MPC increased the rate from 11.5 percent to 13 percent on May 24.
Meanwhile, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, is worried about the implication of the new interest rate for the economy.
Although the MPC expects the step to tame inflation, Dr Yusuf, thinks the opposite may be the case.
“I am concerned about MPR hike because it will burden manufacturers and investors; factors driving inflation in Nigeria different from factors driving inflation in other countries CBN is comparing Nigeria with,” he said during an appearance on Channels Television’s live show on the MPC decision.