The Central Bank of Nigeria (CBN) on Tuesday increased its benchmark interest rate for the fourth time this year, bringing it to 26.75%.
The move comes as the country grapples with its highest inflation rate in nearly three decades and a weakening naira.
CBN Governor Olayemi Cardoso justified the 50 basis point hike, explaining that it was necessary to combat the persistent rise in prices.
Despite previous rate increases, food and energy costs continue to fuel inflation, Cardoso said.
The latest decision follows aggressive rate hikes of 150 basis points in May, 200 basis points in March, and a substantial 400 basis points in February.
Analysts had anticipated a 50 basis point increase, aligning with the bank’s action.
June’s inflation rate surged to 34.19%, marking the 19th consecutive month of rising prices.
While experts believe this might be the final rate hike for now, they caution that further inflationary pressures could necessitate additional tightening measures.
The Nigerian government’s recent decision to increase the minimum wage and allocate additional funds to the budget might exacerbate inflationary trends.
These measures come on the heels of the government’s removal of fuel and electricity subsidies and the devaluation of the naira.
The CBN has indicated that interest rates will remain elevated until inflation is brought under control.
Despite economic challenges, the International Monetary Fund forecasts Nigeria’s GDP to grow by 3.3% in 2024, driven by improvements in the services and trade sectors.
The IMF has commended the CBN’s rate hikes but emphasized the need for a data-driven approach and the building up of foreign exchange reserves.
