Despite 3.46% GDP Growth, CBN Likely to Increase Interest Rate to Curb Inflation
Nigeria’s Central Bank is expected to raise its benchmark interest rate again, according to a report by Bloomberg. Interest rates—defined as the cost borrowers pay for loans or the reward savers earn on deposits—have already been increased multiple times this year, totaling a cumulative 9 percentage points.
With inflation hitting a staggering 33.9% and further risks posed by flooding and rising fuel costs, the Monetary Policy Committee (MPC) is likely to increase rates by another 50 basis points, bringing the benchmark rate to 27.75%.
“We expect the MPC to hike rates to achieve price stability, particularly with a focus on the FX situation,” Victor Aluyi, senior vice-president of Sankore Investments, told Bloomberg.
The soaring cost of food has added urgency to these measures. Recent data from the National Bureau of Statistics (NBS) shows that staple food prices have skyrocketed over the past year. Beans now cost N2,798.50 per kilogram, a 254.23% increase from October 2023, while bread prices rose 103.76%, and local rice saw a 137.32% surge.
Also Read: Prices of Rice, Beans, and Bread Surge Over 100% in a Year – NBS
This inflation surge occurs alongside a surprising 3.46% economic growth in the third quarter, driven by the services sector. While this growth provides some optimism, it complicates the MPC’s decision-making.
“The central bank wants to achieve positive real rates to attract investment and support the naira,” noted Gaimin Nonyane, a director at Fitch Ratings.
However, the approaching festive season is expected to weaken the naira further due to high import demand, adding pressure for a rate hike.
“We are going into December, and the naira typically weakens because of the huge haul of imports,” Aluyi added.
The MPC’s decision, expected later today, will balance inflation control, economic growth, and the need to stabilise the naira.
