The central bank of Nigeria increased the interest rate from 9 per cent. The reason was to reduce the volume of money in circulation.
“The CBN increased the Monetary Policy Rate to 9 per cent. This is the rate at which it will lend money to deposit money banks for the rest of the year. It is part of the strategy to check a jump in the current single digit inflation rate.”
“These measures are intended, amongst others, to deepen inter-bank trading and encourage banks to free-up resources to enlarge the credit market,” Soludo said.

But will the increase really solve the problem? Now let’s analyze this, when the interest rate is increased, the commercial banks will be discouraged to get loan from the central bank. They will be forced to start inter-bank loan i.e. commercial banks will no longer go to the CBN to get loan, they will go to the other commercial banks to get it in a lower interest rate.
    Now we all understand that the money in circulation hasn’t been reduced by the process. It only allows the volume to remain constant. Therefore, since the commercial banks have been forced to get loan from among themselves, the movement of money from bank to bank will tend to increase and move faster. The rate at which money change hands from one institution or person to other will now be high.
The aim was to reduce the volume of money in circulation. But in that process the velocity of money is being increased. (now we'll have the volume being constant and the velocity being incresed). To me, Soludo has done nothing. Or What do you think………

what better option do you have?

I think there are different ways The CBN can reduce Inflation and the volume of money in cireculation. one of the most important thing is open market operation. which is selling of securities to individuals inorder to mop out some money from the public. moreover the increse in intrest rate will have an effect on we individuals too. if the comercial banks get their loan from the CBN with a high intrest rate, then they will b forced to tranfer the same thing to their costomers by increasing the intrest on the loan they give out to the customers. so you see? considring the whole thin, the increase will definitly do more harm than good.