Today’s big stories:

1. Another MPR hike 📈

2. CBN vs digital banks 🏦

3. E-naira wallets are e-mpty 

Here's what you need to know about the economy in 150 seconds.
 

1. Another MPR hike 📈

What’s happening?

The CBN has raised its monetary policy rate by 50 basis points— for the third time this year—to 18.5%, its highest since 2020.

What does this mean?

The CBN’s decision to raise MPR was made in order to curb rising inflation rate in the economy. Headline inflation rose to 22.22% in April 2023 from 22.04% recorded in March, its highest level since September 2005. 

Why should we care?

The CBN cited evidence that if MPR was not raised in April, inflation could have risen to 30.48% as against 22.2%. Despite increasing rates since May 2022 (and causing an increase in borrowing costs), inflation has continued to rise. The CBN expects inflation to continue rising this year, which may mean even more monetary tightening in coming months.

2. CBN vs digital banks 🏦

What’s happening?

The CBN has revoked the licences of 179 microfinance banks (MFBs), 4 primary mortgage banks and 3 finance companies. 

What does this mean? 

Per the gazette, the licences were revoked for breach of the Banks and other Financial Institutions Act. Essentially, these institutions have either remained inactive, insolvent, failed to render returns, closed shop, or ceased to carry on the type of business for which they were licensed for more than six months.

Why should we care?

Digital banks (think Kuda Bank, Fairmoney and VBank) in Nigeria pursue MFB licences as a cost-effective means to become deposit-holding banks. However, revocation of these licences might reduce customer confidence in digital banks. Also, since MFB licences require physical branches, digital banks might face the costly obligation of establishing and maintaining physical offices.

3. E-naira wallets are e-mpty👝

What’s happening?

The IMF says 98.5% of eNaira wallets