In a bid to combat the escalating inflation rates that have been exerting significant pressure on Africa’s largest economy, Nigeria’s Central Bank (CBN) has announced another aggressive rate hike. On Tuesday, CBN Governor Olayemi Cardoso revealed that the monetary policy rate has been increased by 200 basis points, bringing it to an unprecedented 24.75% from the previous 22.75%. This decision marks a continuation of the bank’s stringent monetary tightening efforts aimed at curbing the country’s soaring inflation, which has now surpassed 30% on an annual basis, reaching levels not seen in nearly three decades.
The inflation crisis in Nigeria has precipitated a widespread cost of living predicament, profoundly impacting millions across the nation. With basic necessities becoming increasingly unattainable for a significant portion of the populace, the CBN’s Monetary Policy Committee (MPC) members have voiced their determination to persist with the tightening cycle. Despite these challenges, there is a shared anticipation among the committee members that inflationary pressures will begin to subside starting in May.
Governor Cardoso, in a press conference, underscored the committee’s deliberations, emphasizing the imperative to stabilize inflation expectations and maintain exchange rate stability. “Considerations of the committee at this meeting focused on the current inflationary pressures and the need to anchor inflation expectations as well as ensure sustained exchange rate stability,” Cardoso stated. This meeting is notably only the second convened under Cardoso’s tenure, which commenced last September, highlighting the urgency and gravity of the current economic situation.
The inflationary trends have been significantly influenced by several reforms initiated by President Bola Tinubu during his first year in office. Key among these reforms were the controversial termination of a long-standing fuel subsidy and two devaluations of the national currency, the naira. While President Tinubu has staunchly defended these measures as critical for spurring economic growth and attracting foreign investment, they have incited widespread public discontent and instances of despair among the populace.
Economists are closely monitoring the situation, with predictions indicating a potential continuation of the rate hikes in the upcoming MPC meetings. David Ojomolo, an Africa economist at Capital Economics, projected further tightening in the next two MPC sessions before a stabilization of rates. “We expect Governor Cardoso’s desire to bring the inflation crisis to a close and also strengthen the naira will lead to more tightening,” Ojomolo remarked.
Following the announcement of the rate hike, Nigeria’s sovereign international dollar bonds experienced a noticeable uptick. The 2029 note, in particular, saw significant gains, climbing 1.4 cents on the dollar to 97.9 cents by 1344 GMT, reaching its highest level in almost two years, as per Tradeweb data.
This bold move by the CBN reflects a critical effort to navigate through the country’s inflation crisis and stabilize the economy. With the world watching, the outcomes of these policy adjustments will be pivotal not only for Nigeria’s economic trajectory but also for its position as a leading African economy amidst global financial challenges.
