Nigeria’s Central Bank Raises Interest Rate to Tackle Inflation

The Central Bank of Nigeria (CBN) has announced a significant increase in the country’s interest rate to combat rising inflation. The Monetary Policy Committee (MPC) raised the interest rate by 50 basis points to 26.75% from 26.25% in May 2024.

According to CBN Governor Olayemi Cardoso, the decision was made to tackle the country’s rising core inflation and food inflation, which stood at 34.19% and 40.87% respectively in June. Cardoso emphasized that members of the MPC are aware of the need to address the rising prices of food in Nigeria, which necessitated the interest rate hike.

While all other monetary parameters remained unchanged, the move is expected to have significant implications for businesses, farmers, manufacturers, and investors, who will have to pay more to secure loans from banks. This marks the fourth time the interest rate has been increased since Cardoso’s appointment in September last year.

Interestingly, the country’s inflation rate has not shown any signs of cooling off despite the CBN’s repeated interest rate hikes. Earlier, analysts had called for a pause in the hike of the interest rate, citing concerns that monetary instruments had been overstretched.

“We have overstretched monetary instruments because of inflation. They should put a pause on interest rate hikes,” said Muda Yusuf, Director of the Centre for Promotion of Private Enterprise.

The move is expected to have a significant impact on the Nigerian economy, and it remains to be seen whether it will be enough to curb inflation and stimulate economic growth.