The Central Bank of Nigeria‘s (CBN) Monetary Policy Committee (MPC) on Tuesday, raised the interest rate by 50 basis points, bringing it to 26.75% from 26.25% as of May 2024.
CBN Governor Olayemi Cardoso announced this decision during a press briefing in Abuja at the conclusion of the two-day 296th MPC meeting.
Governor Cardoso explained that the interest rate increase aims to address the escalating core inflation and food inflation, which reached 34.19% and 40.87%, respectively, in June.
He emphasized that the MPC is aware of the urgent need to manage rising food prices in Nigeria, which has led to the decision to raise interest rates.
According to reports from the DAILY POST, this rate hike means that businesses, farmers, manufacturers, and investors will face higher costs when borrowing from banks.
This 296th MPC meeting marks the fourth interest rate hike since Cardoso’s appointment in September of the previous year.
It is worth noting that in May 2023, when President Bola Tinubu took office, Nigeria’s interest rate was 18.75%, while the inflation rate was 22.41%.
Despite the CBN’s persistent rate hikes, inflation in Nigeria has not subsided, prompting earlier calls from analysts for a pause in rate increases.
Muda Yusuf, Director of the Centre for Promotion of Private Enterprise, supports the call to pause interest rate hikes, suggesting that monetary policy tools have been overused and are no longer effective.
“I believe we have overstretched monetary instruments because of inflation. It is time to pause interest rate hikes,” Yusuf stated.
