Attractive yields: CBN raises benchmark interest rate to 24.75% to satisfy investor demand

In response to growing investor demand for attractive yields, the Central Bank of Nigeria (CBN) has announced a significant increase in its benchmark interest rate. Following a two-day Monetary Policy Committee (MPC) meeting, the CBN Governor, Olayemi Cardoso, revealed that the benchmark interest rate has been raised by 200 basis points to 24.75 percent.

The decision to raise the Monetary Policy Rate (MPR) comes amidst widespread anticipation among analysts for measures to address mounting inflationary pressures.

Analysts at FBNQuest had predicted a potential increase in the MPR to mitigate inflationary risks.

Explaining the rationale behind the decision, analysts emphasised the MPC’s firm stance in tackling rising inflationary pressures.

They anticipated a raise in the MPR ranging from 100 to 150 basis points, highlighting the need to maintain an attractive yield environment. Sustaining foreign investors’ interest in high-yielding fixed-income securities is crucial for supporting the continuous appreciation of the Naira, according to analysts.

“Given the MPC’s strong position in addressing rising inflationary pressures, we expect the MPC to raise the MPR by 100bps to 150bps,” analysts at FBNQuest said.

“Our expectation is also supported by the need to maintain an attractive yield environment to sustain foreign investors’ interest in high-yielding fixed-income securities to facilitate the continuous appreciation of the Naira,” the analysts said.