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Nigeria’s central bank raises key interest rate to 27.50%

The Central Bank of Nigeria has announced an increase in the Monetary Policy Rate (MPR) by 250 basis points, taking it from 27.25% to 27.50%. This decision was reached with a unanimous vote by the Monetary Policy Committee (MPC).

In addition to adjusting the MPR, the MPC has decided to maintain the current Cash Reserve Ratio (CRR) for Deposit Money Banks at 50% and for Merchant Banks at 16%. Furthermore, the Liquidity Ratio (LR) remains unchanged at 30%.

The Asymmetric Corridor, which is the range within which the MPR can fluctuate, will also continue at its current levels of +500/-100 basis points around the MPR. This corridor determines the rates at which the central bank lends to financial institutions and takes deposits from them.

The adjustments to the MPR and the decision to hold other rates steady are part of the Central Bank of Nigeria’s monetary policy strategy. The MPR is a critical tool used by the central bank to control inflation and stabilize the currency. By altering this rate, the bank influences borrowing costs and consumer spending, which in turn can affect economic growth.

The retention of the Cash Reserve Ratio and Liquidity Ratio at their respective percentages is indicative of the central bank’s approach to managing the liquidity in the banking system. These rates are essential for ensuring that financial institutions have enough capital on hand to meet their obligations and support economic activities.

The announcement of these monetary policy decisions is significant for financial markets, investors, and the economy as a whole. It directly influences the cost of credit and the returns on savings, impacting both businesses and consumers.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

This post appeared first on investing.com

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