The Monetary Policy Committee of the Central Bank of Nigeria voted Tuesday to increase the benchmark interest rate by 100 basis points to 16.5 per cent, the highest since 2001.

The CBN Governor, Godwin Emefiele, disclosed this while reading the communique of the last MPC meeting of the year on Tuesday, November 22, 2022.

The MPC said the tightening would curb a higher rate of inflation and restore investors’ confidence.

According to a report by Nairametrics, the highlights of the MPC meeting included: increase MPR by 100 basis points to 16.5 per cent; the asymmetric corridor of +100/-700 basis points around the MPR was retained; the CRR was retained at 32.5 per cent; while the Liquidity Ratio was also kept at 30 per cent.

The apex bank had increased the MPR from 11.5 per cent earlier this year to 15.5 per cent across three consecutive rate hikes.

Inflation rate rose to 21.09 per cent in October 2022 from 20.77 per cent in the previous month.

Thortp:
Kuku kill us now

Acidosis:


It will curb inflation. People will be forced to invest their money and idle funds in bonds. treasury bills, fixed deposits, etc. since they're assured of getting 16.5% interest on the minimum. That means fewer money in circulation (supply). When money supply drops, of course, companies and businesses will be forced to drop their prices. That is the positive side.

On the other hand, banks and other lending institutions would rather put their money in secured FG bonds with interest rates of 16.5% or higher than to lend it to the ordinary Nigerian and business owners, who are more likely to japa. This will cause a huge gap in productivity on the long run.

Thortp:
Have you wondered what happened to the initial increase in interest rate by CBN. Is it working?
Let's start from there

Acidosis:


They have to keep up with the trend, unfortunately. That's the only way to achieve the goal of the initial increase.

Thortp:
Let me share my opinion in a lame man language.
Of course, there will be good returns on investment. But we should also consider the Naira buying power.
Let's take 2023 for example: You wait for a year to earn 1.6m on an investment of 10m naira. By then, there will be total removal on fuel subsidy which will eventually lead to rise in cost of living.

We need sincere people in government to curb excesses and corruption. Just imagine Nigeria being an OPEC member, but still borrow to finance her annual budget. Is that not surprising?

The problems are just vast

Acidosis:


It will curb inflation. People will be forced to invest their money and idle funds in bonds. treasury bills, fixed deposits, etc. since they're assured of getting 16.5% interest on the minimum. That means fewer money in circulation (supply). When money supply drops, of course, businesses will be forced to drop their prices. That is the positive side.

On the other hand, banks and other lending institutions would rather put their money in secured FG bonds with interest rates of 16.5% or higher than to lend it to business owners. This will cause a huge gap in productivity on the long run.

Acidosis:


It will curb inflation. People will be forced to invest their money and idle funds in bonds. treasury bills, fixed deposits, etc. since they're assured of getting 16.5% interest on the minimum. That means fewer money in circulation (supply). When money supply drops, of course, businesses will be forced to drop their prices. That is the positive side.

On the other hand, banks and other lending institutions would rather put their money in secured FG bonds with interest rates of 16.5% or higher than to lend it to business owners. This will cause a huge gap in productivity on the long run.