Nigeria’s central bank hiked its benchmark lending rate to 27.25% from 26.75% on Tuesday, representing a 50 basis points (bps) rise.
Olayemi Cardoso, the Central Bank of Nigeria’s governor, disclosed that the Monetary Policy Committee unanimously decided to raise interest in a move to tame persistent inflationary pressures.
It is the fifth rate hike in 2024, after hikes in July (50 bps), May (150 bps), March (200 bps), and February (400 bps).
The hike surprised analysts who expected the apex bank to keep the interest on hold at 26.75 after the Naira currency held steady against the dollar and inflation dropped in August.
Olayemi Cardoso retaliated that the multiple rake hikes in 2024 have helped to keep inflation under control, but inflationary pressures remained.
“The MPC noted that even though headline inflation trended downwards due to a moderation in food inflation, core inflation has remained elevated, driven primarily by rising energy prices,” Cardoso noted.
“The uptrend poses severe concerns to members, as it clearly indicates the persistence of inflationary pressures,” he further added.
In August, inflation in Nigeria dropped to 32.15% on a year-to-year basis. However, the slowdown could be short-lived, following hikes in petrol prices in September.
The upward pressure on prices has been spurred by policies adopted by Tinubu’s government, mainly the devaluing of the Naira and the cuts in electricity and petrol subsidies. The Naira currency has been devalued twice since Tinubu’s administration took over in 2023.
Nigeria’s inflation is at risk of lingering after extensive crop damage due to floods in the northern parts of the country. The floods could potentially reduce harvest, causing higher food prices.
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