Amanze Chinonye
Nigeria’s central bank cut its benchmark interest rate by 350 basis points to 23% on Tuesday, while recalibrating the Standing Facilities Corridor as it adjusted its monetary policy implementation framework, Prime Business Africa reports.
Central Bank of Nigeria Governor Olayemi Cardoso announced the decision after the Monetary Policy Committee’s 307th meeting in Abuja on Tuesday, Sept. 22.
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The committee also reset the corridor to plus 50 and minus 300 basis points around the Monetary Policy Rate (MPR), while retaining existing reserve requirements for banks.
The Cash Reserve Requirement remains at 45% for deposit money banks, 16% for merchant banks and 75% for non-Treasury Single Account public-sector deposits.
Cardoso said the committee had reviewed developments in the global and domestic economies, emerging risks and their potential implications for monetary policy.
“The Committee decided as follows: reset the monetary policy rate at 23 per cent,” Cardoso said.
The MPC had kept the MPR unchanged at 26.5% at its two previous meetings, after cutting the rate by 50 basis points in February.
The latest reduction comes as inflation has moderated. Headline inflation fell to 15.39% year-on-year in August from 15.43% in July and 23.14% a year earlier, according to the National Bureau of Statistics. Food inflation also declined to 19.57% from 20.31% in July.
Cardoso said the reset of the MPR and recalibration of the corridor were intended to strengthen monetary policy transmission and reinforce the policy rate as the principal signal for market conditions.
He said the corridor adjustment should not be interpreted as a change in the underlying monetary policy stance, but as an operational realignment intended to improve policy implementation and support Nigeria’s transition towards an inflation-targeting framework.
“The MPC emphasized that the duration of the corridor does not constitute a change in the current monetary policy stance, but rather an operational reset to enhance the effectiveness of monetary policy and support the transition to an inflation targeting framework,” Cardoso said.
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The governor said MPC members considered the current macroeconomic environment supportive of the recalibration without undermining the disinflation process.
The committee said the revised framework would better align monetary policy implementation with market conditions, strengthen transmission and restore the MPR as the principal signal of monetary policy.
The decision leaves the banking system’s reserve requirements unchanged while significantly lowering the benchmark rate and narrowing the policy corridor.
Amanze Chinonye is a Staff Correspondent at Prime Business Africa, a rising star in the literary world, weaving captivating stories that transport readers to the vibrant landscapes of Nigeria and the rest of Africa. With a unique voice that blends with the newspaper's tradition and style, Chinonye's writing is a masterful exploration of the human condition, delving into themes of identity, culture, and social justice. Through her words, Chinonye paints vivid portraits of everyday African life, from the bustling markets of Nigeria's Lagos to the quiet villages of South Africa's countryside . With a keen eye for detail and a deep understanding of the complexities of Nigerian society, Chinonye's writing is both a testament to the country's rich cultural heritage and a powerful call to action for a brighter future. As a writer, Chinonye is a true storyteller, using her dexterity to educate, inspire, and uplift readers around the world.
