The Brief: Nigeria’s Central Bank hikes interest rates by 200 basis points

The Event

The Central Bank of Nigeria (CBN) raised its monetary policy rate (MPR) for the tenth consecutive time by 200 basis points (bps) to 24.75% at its second Monetary Policy Committee (MPC) meeting of 2024, held today, March 26th. 

The MPC also adjusted the symmetric corridor of +100/-300 bps around the MPR. However, the MPC did not change other monetary parameters, such as the cash reserve ratio of 45% and the liquidity ratio of 30%. This move marks progress in Nigeria’s efforts to rein in escalating inflation and support a more market-determined exchange rate by closing the negative real interest rate gap.  

This brief examines how this decision affects the country’s currency risk and interest rate environment. 

Macroeconomic implicationsFollowing the previous interest hike in February 2024, the stop rates across all tenors of treasury bills (T.bill) rose by an average of 107.7 basis points, with the 364-day T.bill priced at