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Business News of Wednesday, 25 January 2023


CBN increases interest rate to 17.5%, insists no extension of deadline for deposit of old naira notes

A collage of Mr Godwin Emefiele and the new naira notes A collage of Mr Godwin Emefiele and the new naira notes

The Central Bank of Nigeria via its Monetary Policy Committee has approved the raise of its benchmark interest rate to 17.5% from 16.5%.

Mr Godwin Emefiele, the CBN governor disclosed this today, Tuesday, January 24, 2023, while briefing the press at the end of the committee's meeting which was held in Abuja, the nation's capital.

This is the first interest rate increase for the year and the fifth consecutive increase despite protests by key stakeholders. The CBN had effected the interest rate increases in an effort to curb the country's rising inflation rate.

The MPC had earlier raised the rate to 16.5% in November 2022, in an effort to control inflation and ease pressure on the naira. Tuesday's interest rate hike comes up regardless of the easing of last month's (December 2022) headline inflation from 21.47% to 21.34% recorded in November 2022.

The CBN governor acknowledged the recent moderation of the inflation rate but admitted that the country's economy was going through some challenges which would not allow the bank to ease the benchmark interest rate for now, hence the MPC's vote to raise.

Other major decisions taken by the CBN include retaining the MPR asymmetric corridor of +100/-700 basis points.

The Liquidity Ratio which is the proportion of deposits and other assets the banks must maintain to be able to meet short-term obligations was retained at 30%.

The Cash Reserve Ratio (CRR) which is the share of a bank’s total customer deposit that must be kept with the CBN in the form of liquid cash was retained at 32.5%.

The CBN governor used the opportunity to reiterate that there would not be an extension on the January 31 deadline for the depositing of old naira notes, despite the bottlenecks associated with the withdrawal of the new naira notes.

Emefiele stressed that the reason for no extension on the January 31 deadline is his belief that 100 days was more than enough for anyone to deposit old banknotes with their banks. He said the CBN went as far as directing banks to open their doors to customers on Saturdays to receive the old naira notes.

In the last couple of weeks, there has been pressure from some quarters, especially the Nigeria Governors’ Forum, the Senate and the House of Representatives for the CBN to extend the deadline for the depositing of old N200, N500 and N1000 notes.

This follows complaints by bank customers that they are unable to receive the new naira notes from ATMs as the CBN had earlier directed the deposit money banks to ensure its availability. A few customers who were able to withdraw the new notes from ATMs have complained about the mutilation of some of the banknotes.