The new development makes it the second consecutive time the central bank would raise the benchmark rate in 2022.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has raised the benchmark interest rate to 14 per cent from 13 per cent.
The CBN governor, Godwin Emefiele, made this known Tuesday while addressing journalists after the committee's meeting at the CBN headquarters in Abuja.
Mr Emefiele said the hike in interest rate would help address Nigeria's rising inflation.
The MPR refers to the baseline interest rate around which all other lending rates revolve.
In a bid to address inflation, the new development makes it the second consecutive time the central bank would raise the benchmark rate in 2022.
Nigeria's inflation rose in June to its highest level in more than five years, fueled by rising prices of food and the high cost of diesel.
The inflation rate surged to 18.60 per cent in June, up from 17.71 percent in the previous month, according to the National Bureau of Statistics (NBS). The new rate is the highest the nation has recorded since January 2017.
The NBS said that the rate is 0.84 percent points higher compared to the rate recorded in June 2021, which is 17.75 percent.
"This means that the headline inflation rate increased in the month of June 2022 when compared to the same month in the previous year (i.e., June 2021)," the NBS said in its report last Friday.
In the same vein, the composite food index rose to 20.60 percent in June 2022 on a year-on-year basis, the NBS said. The rise in the food index was caused by increases in prices of bread and cereals, food products, potatoes, yam, and other tubers, meat, fish, oil and fat, and wine.
Analysts have questioned the effectiveness of raising interest rates in solving the inflation problem, arguing that prices are driven high by low supply of goods and essential commodities.
On Tuesday, although the apex bank increased the MPR rate, it retained other parameters.
The asymmetric corridor remains +100 and -700 basis points around the MPR, while the Cash Reserve Ratio (CRR) was put at 27 per cent.
"Committee thus voted unanimously to raise the Monetary Policy Rate (MPR)," Mr Emefiele said.
"One member voted to increase the MPR by 150 basis points, six members by 100 basis points, one member by 75 basis points and three members by 50 basis points.
"Consequently, Committee resolved to increase the MPR by 100 basis points from 13 percent to 14 percent. In summary, MPC voted as follows: Increase MPR to 14% from 13, retain the Asymmetric Corridor at +100 and -700 basis points around the MPR, retain the CRR at 27.5 percent and retain liquidity ratio at 30 percent."