The Bank of America says the Monetary Policy Committee of the Central Bank of Nigeria may need to increase interest rates by at least 700 basis points before the end of the year to curb inflation.
The bank’s sub-Saharan Africa Economist, Tatonga Rusike, who disclosed this in an interview with Bloomberg said the hike was necessary to tackle soaring inflation occasioned by the fuel subsidy removal and unification of foreign exchange.
At the current trend, Rusike explained that inflation may quicken to 30 per cent by the end of the year from 22.4 per cent in May, noting that the nation’s apex bank may need to push up the rates.
Rusike warned that if the decision was not taken, foreign investors might exercise caution before investing in the country.
“Inflation may quicken to 30% by the end of the year from 22.4% in May and that will require a monetary policy response from the central bank – effectively, interest-rate hikes by at least 700 basis points.
“If the negative real interest rate is not reversing, then it is less likely to see foreign inflows coming into the country,” Rusike said adding that “it is less likely they (CBN) will do such level of increases,” he said.
The apex bank, since last year, has been increasing the country’s interest rates, Information Nigeria reports.
At its last Monetary Policy Committee meeting held in May 2023, the benchmark interest rate was further pushed forward by 0.5 per cent to 18.50 per cent from 18.00 per cent in March.
The raise has however not slowed Nigeria’s soaring inflation which hit 22.41 per cent in May 2023 compared with 22.22 per cent in April 2023.
