Why MPR was increased – #CBN

 

The Central Bank of Nigeria says its Monetary Policy Committee’s decision to increase Monetary Policy Rate is to control rising inflation.

CBN’s Director, Monetary Policy Department, Hassan Mahmoud, said this on Wednesday at a post-MPC briefing tagged: “Unveiling Facts behind the Figures’’.

The MPC, in its 287th meeting on Tuesday, had increased the MPR by 150 basis points, from 14 per cent to 15.5 per cent.

The MPR is the baseline interest rate in an economy on which other interest rates within that economy are built on.

According to Mahmud, the MPC got to a point where stringent measures have to be taken to control inflation.

He said that the committee took cognisance of global as well as local economic issues in arriving at its policy decisions.

“We raised the MPR because it is necessary to do so. The quantity of money in the system was too much for the economy to absorb,’’ he said.

He said that monetary policy tools were meant to deal with short term risks, adding that the idea was to make the cost of funds expensive to drive down inflation.

According to Mahmud, the stimuluses that governments across the world provided for their citizens during COVID-19 increased the ability of people to spend, thereby, creating challenges with global supply.

He, however, said that one of the best-performing interventions was the Commercial Agriculture Credit Scheme, where out of the N800 billion that was lent out, about N700 billion had been repaid.

Yila said that through the flagship agriculture intervention scheme, the Anchor Borrowers Programme, one trillion Naira had been lent out to smallholder farmers, while about N400 billion has so far been recovered.

According to him, the department will restrict intervention to critical sectors like the SMEs and the electricity sector for now.

Speaking on the depreciation of the Naira, the Director, Trade and Exchange Department, Mrs Ozoemena Nnaji, said the apex bank was taking steps to firm up the currency.

Nnaji said that demand for foreign exchange outstripped supply currency, adding that the CBN was doing a lot to mop up supply.