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Inflation: Knocks, Kudos Trail CBN’s Hike Of Interest Rate To 16.5 Percent

Published

3 years ago

November 24, 2022

In less than three months after it had raised the country’s interest rate to a double-digit, 15.5 percent, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) again on Tuesday raised the benchmark for lending to 16.5 percent as a bullish move to tackle inflation.

At the same time, CBN says it is eyeing plans to reduce the volume of N500 and N1000 notes in circulation “over time” to tame inflation.

Recall that the CBN had earlier increased the MPR by 100 basis points, from 13 percent to 14 percent in July this year.

The bank has made several justifications, to address Nigeria’s skyrocketing inflation in line with basic economic theory, stating that interest rate is inversely related to inflation.

Announcing the committee’s decision at the end of its two-day meeting on Tuesday, the CBN Governor, Mr Godwin Emefiele, said the MPC also decided to hold all other parameters constant.

The Asymmetric Corridor of +100/-700 basis points around the MPR was, thus, retained; the Cash Reserve Ratio (CRR) was maintained at 32.5 percent and the Liquidity Ratio of 30 percent was also maintained.

According to Emefiele, 11 members of the MPC unanimously okayed monetary decisions.

“Nine members voted to raise the MPR by 100 basis points, while two voted to raise rates by 50 basis points,” he said.

Emefiele said in deciding on its policy stance, the MPC felt that all the causative factors in the economy, like the Russian-Ukraine war and supply chain disruption were still dominant.

“Loosening option was not desirable at this meeting. The committee also felt that with the rising inflation, loosening the stance of policy would lead to a more aggressive rise in inflation.

“As regards whether to hold, the MPC was of the view that doing that close to December festive season and expected heavy spending during the 2023 general election would jeopardise the gains of previous policy rates tightening.

“It would plunge the economy deeper into the inflation trap,” he said.

He added that the MPC decided to continue tightening at a somewhat moderated rate.

“At this meeting, the options considered were whether to hold or further tighten policy rates.

“The option to loosen was not considered as this will greatly undermine the gains of the three previous decisions,” he said.

In the same vein, the bank governor, Emefiele, announced plans to reduce the volume of N500 and N1000 notes in circulation “over time.”

The Governor made this known in his briefing to the media at the monetary policy communique held on Tuesday.

He was responding to questions about the ease of counterfeiting N1,000 notes and if there were plans to reduce the volume

Emefiele claimed that the effort is aimed at curbing the inflation rate, which he partly blamed on the higher-denominated naira notes.

He started by using the UK as an example, saying, “In the UK, they have a denomination of 50 pounds, but the most spent denomination is 20 pounds. Nobody spends 50 pounds. If you carry 50 pounds in the UK, they will suspect, sic, report you.”

And then comparing this to Nigeria, “The reverse is what is happening in Nigeria.

“Nigerians want to carry N500 and N1,000. And in fact, we are beginning to think that increasing the high denomination is also part of fueling inflation. So, yes, we will launch N200, N500, and N1,000; over time, we will reduce the volume of N500 and N1,000 in circulation. Let people carry N50 around.

“If you want to do high-value transactions, embrace online, embrace our agency programme, embrace our mobile banking programme, that is what you need,” he said.

The latest monetary decision has generated both knocks and kudos from economic experts, and stakeholders.

Raising interest rate alone won’t tame Nigeria’s inflation — Experts

In a swift response to the apex bank’s policy to raise the interest rate, a Financial Inclusion/Wealth Management expert, Mr Idakolo Gbolade said an interest rate increase alone wouldn’t tame Nigeria’s inflation and ailing economy.

Gbolade, reacting to the CBN latest interest rate increase to 16.5 percent, made this disclosure in a chat with DAILY POST.

In sharp contrast to CBN’s position on the latest monetary decision, Gbolade, on the contrary, stated that owing to the political atmosphere, the current government may not achieve any change in the nation’s economy before the handover in 2023. He added that the decision could further worsen the continued fall of the Naira.

“The CBN decision is predicated on their constant effort to tame Nigeria’s stubborn inflation, which has not relented despite consistent increases in interest rates in the last six MPC meetings.

“The effort is also geared towards mopping up excess liquidity in the economy.

“The CBN is also aiming at boosting investors’ confidence and profitability projections regarding foreign inflows which can positively impact our foreign reserves.

“The MPC decision could further cause the value of the Naira to continually decline due to persistent scarcity of the Dollar.

“The rising cost of food items will not decrease because of the declining value of the Naira.

“Energy cost is also projected to increase as the cost of doing business in the sector will significantly increase.

“In fairness to the CBN, these measures are supposed to tame inflation and cause the economy to bounce back, but these policies alone cannot cause the needed change looking at political activities that are unfolding and this present government might not be able to do much before handover in 2023,” he stated.

Raising MPR will spike inflation

Also, reacting to the development, the Chief Executive Officer, BIC Consultancy Services, Mr Boniface Chizea said he anticipated that the MPC would increase rates but didn’t expect it to be that high.

“Yes! This was anticipated but probably not as steep as an increase of 100 basis points considering the rapid pace at which the rates have been increased over the last two to three meetings.

“With the inflation rate rising beyond 20 per cent, MPC did not have much choice. No corporate treasurer will be ready to save money today and earn returns several basis points below the inflation rate!

“So, it is imperative to raise base interest rates by this hike. Unfortunately, on the other hand, interest rates as factor costs have the potential to spike the inflationary pressures,” he said.

A Professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun, Sheriffdeen Tella, who didn’t see the increase coming, said the higher rate would compound inflation.

“When I heard about it, I was shocked. The higher interest rate will compound the inflation woe.

“Government should reduce its expenditure and CBN should stop lending to the government. The exchange rate should further appreciate – those are the solutions,” he said.

However, Prof. Ndubisi Nwokoma, Director, Centre for Economic Policy Analysis and Research (CEPAR) University of Lagos, said the increase of the benchmark rate would fight inflation.

“Yes, the increase was expected. This is as it should be given that inflation has risen to over 21 per cent and that the burden of debt service is increasing.

“The current negative return to capital vis-a-vis inflation should be addressed with this move.

“Although this tightening of credit by this move will impact negatively on economic growth; it will nonetheless help to fight inflation as well as attract new capital into the economy and address the challenges in the exchange rate of the naira,” he said.

For the Executive Director of Nigerian Workforce Strategy and Enlightenment Centre (NIWOSEC), Dr. David Ehindero the increment of the Monetary Policy Rate (MPR) by 100 basis points to 16.5 percent from 15.5 percent will have a positive implication on the dwindling economy.

He emphasised that the Apex bank must ensure stability in the economy before introducing new guidelines and involvement of stakeholders is necessary too.

He said, “The Government should consider reducing the cost of Governance to enable more public spending for the masses or tax the masses.

“An increased tax rate is already burdened, and an inflation-infested society like Nigeria is the height of insensitivity. The majority of Nigerians can’t access goods in the market; Nigerians are not leaving; they are surviving. Let the government consider reducing the cost of Governance and seal every loophole in the economy through corruption and frivolous spending.

“Government should also look deep into the padding of our annual budget with projects that will have no direct bearing on economic growth because the ordinary man doesn’t know what MPC policy is.”

Enhindero appealed to the CBN to engage the public rigorously in enlightenment, especially on the issue of currency redesign for a better approach amidst the MPC policies implementation.

Borrowers, investors, pensioners will suffer from the interest rate increase

A don of Accounting and Financial Development at Lead City University, Ibadan, Prof. Godwin Oyedokun, said investors, borrowers, and pensioners would suffer from the policy.

He explained that theoretically, increasing interest rates leads to inflation reduction.

“The interest rate increase is not new; for instance, last year, England tried to increase the interest rate to curb inflation because it is believed that inflation will decline when the interest rate is up.

“While interest is rising, it will cool down prices but would make borrowing more expensive. In the interim, increasing interest rates will reduce inflation. It is within the purview of the Central Bank of Nigeria to intervene in Monetary policy.

“Of course, at times, it could also impact the cost of prices of products in the market. In theory, inflation and interest rate have an inverse relationship; when interest rates are low, inflation tends to rise, while when interest rates are high, inflation tends to reduce.

“If we have a high rate of inflation, what happens is that you lose the value of the equivalent of whatever you hold as an asset.

“There are two important things we are discussing, the interest rate and inflation. If the interest rate is high, it will increase the cost of borrowing; the borrowers will have to pass the cost to consumers by increasing the price of the product/service.

“On the other hand, if you are not borrowing money from the bank, instead keep depositing cash at the bank for saving or fixing, the rate of returns will be higher.

“Inflation will reduce the value of your savings not from the bank but from the economy. What happens is that a certain percent of inflation would have affected it. So if the interest is high, say 16 percent and the rate of inflation is 10 percent, you will be left with 6 percent.

“Those getting loans will suffer for it, while those with deposits in their accounts will gain more money. If you do plus and minus, the situation is better than having a low-interest rate.

“Pensioners will also suffer because pensions are static and this will reduce their purchasing power. The only people that will gain are those who keep their money as a deposit with high-interest rates,” he said.

In all this, Nigerians seek a quick end to poverty, rising inflation, insecurity, among other economic miseries.
DAILY POST

News

Senate Confirms Ex-CDS Musa As Defence Minister After Five-hour Screening

Published

9 hours ago

December 3, 2025

Editor

The Senate on Wednesday confirmed the appointment of a former Chief of Defence Staff, Gen. Christopher Musa (retd.), as Nigeria’s new Minister of Defence following a rigorous five-hour screening by lawmakers.

During the confirmation hearing, Musa faced tough questions on recent security lapses, including the withdrawal of troops from Government Comprehensive Girls Secondary School, Maga, in Kebbi State, shortly before the abduction of schoolgirls on November 17.

The incident sparked national outrage.

Musa assured the Senate that he would immediately set up a full-scale investigation into the troop withdrawal once he assumes office.

He also vowed to probe the recent killing of a brigade commander in Borno State, Brigadier General Musa Uba, and other attacks targeting military officers.

He said, “It is very unfortunate and really painful. I want to assure Nigerians that we will not stand by and have terrorists have the capacity to do such.

“We are going to go after them fully, working together with all the security agencies and Ministries, Departments and Agencies (of government). We are going to investigate fully.

“The Armed Forces have a way, and then from the defence, we are going to make sure that we continue with the oversight over their activities.”

The nominee highlighted gaps within the armed forces and called for enhanced funding, strengthened community engagement, and coordinated inter-agency operations.

He also emphasised the need to protect schools through the Safe Schools Initiative and a zero-tolerance approach to terrorism and banditry.

The screening session saw moments of tension in the chamber.

Senator Sani Musa (APC, Niger East) suggested Musa be allowed to “take a bow and go,” prompting protests from lawmakers, including Senator Garba Maidoki (PDP, Kebbi South).

Senate President, Godswill Akpabio, intervened, urging a thorough screening and noting that Nigerians and the international community were closely watching the process.

Musa, nominated on Tuesday by President Bola Tinubu following the resignation of Defence Minister, Badaru Mohammed, on health grounds, pledged to prioritise the protection of lives and national territory.

“I pledge to do my best to ensure that Nigeria is secure and safe.

“We need the support of everyone, every Nigerian, working together as a team, because it’s going to be a team effort.

“The enemies we are dealing with are evil forces that don’t mean well for this country and have no respect for human lives… If we don’t work together, we will allow them to perpetrate the evil acts they have been doing,” he said.

His confirmation comes amid heightened concerns over nationwide kidnappings, insurgency and mass abductions.

News

NUC Gets €3m Loan To Start ICT Projects In Varsities

Published

10 hours ago

December 3, 2025

Editor

This initiative, known as the Blueprint-ICT-Dev Project, aims to upgrade digital infrastructure, strengthen ICT capabilities, and promote digital literacy in these institutions.

The National Universities Commission says it has received €3m as the first tranche of the $40 million loan secured from the French Development Agency to support Information, Communication and Technology projects in 10 selected universities across the country.

Executive Secretary of the commission, Abdullahi Ribadu, announced this during the inaugural meeting of the 13th NUC Board on Wednesday at the commission’s headquarters in Abuja.

Ribadu noted that since he assumed office about a year ago, the commission has pushed forward initiatives centred on research, entrepreneurship, digital transformation and skills development across Nigerian universities.

“We have secured $40 million loan from the French Development Agency for the ICT Blueprint Project in 10 selected universities. We have strengthened – only yesterday, the director confirmed to me that the first tranche of €3m has been deposited in our CBN account to kick-start the process.

“We have strengthened internal financial management, expanded access to university education through the licensing of new private universities, and approved new programmes and units.

“We have also supported the take-off of publicly funded universities, expanded open and distance learning centres, and continued system-wide quality assurance exercises. Currently, the 2025 Accreditation Exercise is ongoing.

“These priorities continue to form the foundation of the Commission’s direction, and I am seeking your support in advancing them,” he said.

Ribadu assured the board of the commission’s full cooperation, saying the management stands ready to draw from the members’ expertise.

“We will rely on your wisdom to guide us as we carry out our duties. I am confident that your collective experience will strengthen the commission’s capacity to guide the Nigerian university system at a time when higher education continues to evolve.

“We also look forward to using your networks to help advance projects and partnerships that will benefit the Commission and the entire university system,” he added.

On his part, Chairman of the 13th NUC Board, Emeritus Professor Oluremi Aina, thanked President Bola Tinubu for his sustained support for the university sector.

He said the board is assuming its mandate at a time of transition for higher education, with global standards rising and expectations increasing.

Aina outlined five central pillars that will guide the Board’s work, covering performance evaluation, improved university rankings, digital literacy, research and institutional reforms.

He said, “As we settle into this assignment, but permit me to present what I call five pillars that I believe will help guide our stewardship. One, evaluation of NUC performance.

“We must examine in detail the Act that buffered and laid the foundation for the NUC. We also need to be conversant with the various amendments to the act, its vision and mission, guiding principles and ethics.

“Then we must study the commission’s operational challenges and landmark achievements. Going forward, we should compare ourselves against global standards, not sentiments, not history, and where we fall short, how we fall short, and why we must adjust boldly. Two, aligning with the renewed hope agenda of the present administration, the president has made education a pillar of national rebirth with the establishment of the fund and other initiatives.

“The signal sent to the world is that Nigeria is ready to reset and rebuild. Through our assignment, we must lead other key stakeholders in the higher education sector. In pragmatically resolving the naughty and nagging agitation of the academic staff union and other university unions.

“Advancements must also be made to enhance digital literacy and especially the use of artificial intelligence, AI, as tools to strategically reposition the universities nationally and internationally. Overall, it will also be a priority for the 13th board to work with the management for radical improvements in both the global and webometric ranking of our universities.”

He added, “Three, identifying and dismantling obstacles to university quality. Governance deficiencies, fund constraints, research stagnation, et cetera, must no longer be accepted as normal. Our duty is to reform and make progress, not to manage decline.

“Four, reviewing existing funding and exploring new channels for sustainable funding. Nigerian universities cannot thrive on ingenuity alone. The board must intensify the research for alternative funding sources. Strengthen utilisation and explore emerging and local opportunities.

“And five, investing in the welfare and capacity of NUC staff and regulatory infrastructure. The system cannot overperform its operators. Credible accreditation and monitoring require strengthened conditions of service and protected regulatory independence.”

Aina added that the board would fully leverage technology in its operations.

“We will seek to leverage technology to ease our burden through the adoption of digital platforms for the advancement of our collective objectives. And I have a charge for the board.

“This board, in whom I am well-pleased, carries with it the weight of expectations and aspirations of the Nigerian people,” he said.

Earlier this year, the French Development Agency provided a €38 million credit facility to the National Universities Commission to support the digital transformation of 10 federal universities in Nigeria.

This initiative, known as the Blueprint-ICT-Dev Project, aims to upgrade digital infrastructure, strengthen ICT capabilities, and promote digital literacy in these institutions.

News

Satguru Maharaj Pledges To Facilitates Kanu Release If…

Published

10 hours ago

December 3, 2025

Editor

The founder of One Love Family, Satguru Maharaj Ji, has vowed to get the incarcerated leader of the proscribed Igbo group, Indigenous People of Biafra, Nnamdi Kanu, released if the Biafra radio and sit-at-home order are stopped.

Maharaj Ji stated this while speaking in an interview granted to his temple’s in-house radio on Wednesday.

According to him, the IPOB leader was culpable of the terrorism charges levelled against him, and anyone guilty is liable to a death sentence.

He said, “We are, however, grateful that the matter has been put on hold in the sense that, by the accusations, it is always going to be death, looking at the level of crimes attached to him, with the way and manner the constitution is written. Anybody who is accused of doing such a thing (terrorism) is sentenced to death. It is only out of grace that Kanu was able to escape.

“So now it has to be by political settlement before he (Kanu) can be released, and it will be addressed in so many ways. For anyone advocating for his pardon, they have to take positive steps. In other words, they must not do so with empty hands; they should stop the Biafra radio wherever it is. Secondly, the sit-at-home order should be stopped, and the judgment should be accepted while the Igbo elders go behind the scenes to analyse and explain to the President.

“Today, the Igbos have been brought to the central realms of politics by Tinubu. And the Northern caliphate is not happy about it. They are not excited about the commission they were given…They should stop the propaganda that the East is about to be Islamised. When those are done, I know how to watch it out, Kanu will come out. I will help facilitate his release.“

The cleric joined the likes of Abia State governor, Alex Otti, activist Omoyele Sowore, and other South-East leaders to intensify efforts to secure the release of detained Kanu through a political arrangement, assuring residents of the region that “all hope is not lost.”

On Tuesday, Otti met Tinubu at the State House, Abuja, after visiting Kanu in the Sokoto prison facility, where the IPOB leader is serving his sentence.

Otti’s meeting with the President is believed to be part of ongoing engagements aimed at securing the release of the detained Kanu.

Recall that Kanu bagged a life sentence instead of the death penalty after the presiding judge, Justice James Omotosho, handed down the sentence on counts one, two, four, five, and six.

The judge also handed Kanu a 20-year jail term on count three, with no option of fine, and a five-year jail term on count seven, with no option of fine.

Justice Omotosho delivered the judgment after convicting Kanu on all seven counts of terrorism offences.