The Central Bank of Nigeria (CBN) has increased the interest rate for intervention loans from 5% to 9%, effective from July 2022.
This was disclosed via a press release from the apex bank titled “Adjustment Of Interest Rate On All Central Bank Of Nigeria Interventions”
This is coming on the heels of a hike in savings deposit interest rate from 1.4% to 4.2% as part of the efforts to combat inflation.
CBN lowered the interest rates on its intervention facilities from 9% to 5% in March 2020 as part of attempts to combat the COVID-19 outbreak.
Nariametrics reported that the apex bank agreed to leave interest rates for its development finance actives or intervention funds at 5% per annum until March 2023.
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“The MPC is of the view that rates on the development finance initiatives of the Bank should remain at 5 percent till March 2023,” it said.
However, the Central Bank may have changed its strategy to maintain low-interest rates as a result of the ongoing inflation spike in July.
What the CBN is saying
The apex bank said, “Further to our circular dated March 15, 2022 (Ref: FPR/DIR/PUB/CIR/001/040) extending the period of interest reduction to all intervention facilities from nine per cent to five per cent per annum (as part of measures to mitigate the negative impact of COVID-19 pandemic on the Nigerian economy), the Central Bank of Nigeria hereby reverts the interest rate on all its intervention facilities to nine per cent per annum.
“The reversed rates shall be implemented as follows: All intervention facilities granted effective July 20, 2022, shall be at a nine per cent per annum; All existing intervention facilities granted prior to July 2022 shall be at nine per cent per annum effective from September 1, 2022.”
What you should know
- Nigeria’s inflation rate for July 2022 rose to a 17-year high of 19.64%, compared to the 15.6% seen in January. This indicates a 25% increase in inflation within 7 months.
- Hence the Nigerian Monetary authority has deployed a contractional monetary policy to combat inflation.
- This means sectors such as agriculture, power, and aviation which have enjoyed trillions of dollars in intervention funds from the central bank would have to pay 9% instant of the 5% previously enjoyed.
- Raising the monetary policy interest rates to 13% from 11.5% is also in an effort to checkmate inflation.