Nigeria’s Central Bank Implements Interest Rate Hike Amidst Economic Challenges

In a move to address inflationary pressures and sustain the economy, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria has decided to raise the benchmark interest rate by 25 basis points to 18.75 per cent. This decision was disclosed by the Acting CBN Governor, Folashodun Shonubi, during the fourth MPC meeting of the year held on Tuesday.

Mr. Shonubi informed journalists in Abuja that the committee also voted to adjust the asymmetric corridor around the MPR to +100 and -300 basis points. This move comes after the CBN initiated its monetary policy tightening cycle in May 2022, with a steady increase in the benchmark interest rate from 11.5 per cent to 18.5 per cent.

Expectations among analysts had been diverse leading up to the MPC meeting, especially following the suspension of Godwin Emefiele as the CBN governor. President Bola Ahmed Tinubu had advocated for reduced interest rates to boost investment and consumer spending, aiming to bolster the economy.

However, analysts have noted that challenges like the removal of fuel subsidies, rising energy prices, and the liberalization of the exchange rate could contribute to persistent inflationary pressure. They emphasize the need for aggressive measures from the MPC to effectively tackle these challenges.