The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) yesterday disclosed a tightening of monetary policy stance by increasing the monetary policy rate (MPR) by 200 basis points from 12 per cent to 14 per cent.
But the committee left the Cash Reserve Ratio (CRR) and the Liquidity Ratio unchanged at 22.5 per cent and 30 per cent respectively.
The CBN Governor, Godwin Emefiele, who announced the decision of the committee after a two-day 108th meeting in Abuja, said five out of the eight members that attended the meeting voted in favour of monetary policy tightening.
The remaining three members, according to him, voted to hold the rate at 12 per cent.
The Monetary Policy Rate is the anchor rate at which the CBN, in performing its role as lender of last resort, lends to Deposit Money Banks (DMBs) to boost the level of liquidity in the banking system.
If the apex bank intends to increase the level of liquidity in the economy, it reduces the MPR but increases it when it intends to tighten money supply.
In taking the decision to increase MPR, Emefiele said the committee was faced with two policy choices whether to stimulate growth or to fight inflation.
He, however, said when considered from the standpoint that the primary mandate of the CBN is to maintain price stability, the committee decided to focus on its mandate by checking inflationary pressures.
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The Nigerian economy, according to him is still saddled with the effects of the shocks of the first quarter of 2016 which led to a contraction in output arising from energy shortages, high electricity tariffs, price hikes, scarcity of foreign exchange and depressed consumer demand, among others.