The Central Bank of Nigeria (CBN) has hiked the benchmark interest rate to 12 per cent, few months after it reduced it to 11 percent.
Rising from the 248 Monetary Policy Committee (MPC) meeting, the CBN also increased the cash reserve requirement (CRR) from 20 to 22.5 per cent.
The MPC, however, retained the liquidity ratio at 30.00 per cent and arrowed the asymmetric corridor from +200 and -700 basis points to +200 and -500 basis points.
With these revised measures, the monies available to banks for lending by deposit money banks is significantly reduced and the interest on loans by deposit money banks would rise again.
Delivering the communiqué at the end of the two days' meeting, the CBN governor, Mr. Godwin Emefiele, said these measures became necessary as excess liquidity in the banks was impacting negatively on the foreign exchange market and impacting inflation.
"From the monetary data, the committee noted that the excess liquidity in the banking system was contributing to the current pressure in the foreign exchange market with a strong pass-through to consumer prices.
"The committee further noted that previous efforts to reflate the economy in order to spur growth did not elicit the required response from DMBs, hence; the surfeit of liquidity in the interbank market.
"Obviously, the attendant low rates at that market have not transmitted to the term structure of interest rates."
"Concerned about the need for low interest rates to support growth and employment, the committee urged the CBN to explore innovative ways of ensuring the unhindered flow of credit at low cost to key growth sectors," Emefiele said.
The CBN governor also said the report that $20 billion in domiciliary account was idle was not true.