Nigeria’s central bank raises interest rate on price pressure

The Central Bank of Nigeria raised its benchmark lending rate by 50 basis points to 18% on Tuesday, extending a tightening policy that began last year in a bid to check high inflation.

Inflation rose to 21.91% in February, the highest in nearly two decades, despite the central bank’s cashless policy that scooped about two-thirds of cash from the economy, in part, to tackle inflation.

The central bank has now raised rates from 11.5% last year to 18%, its highest ever level.

The governor of the CBN, Godwin Emefiele, said 10 members of the Monetary Policy Committee voted to raise the rates by 50 basis points, while one voted for a 25 basis point increase and one voted to hold.

They cited high prices and exchange rate pressures and expectations of the removal of a petrol subsidy that cost $10 billion last year. The removal of subsidy, which analysts expect the incoming Bola Tinubu administration will implement, is expected to push prices higher.

Mr Emefiele said the committee also reflected on fears further hikes may affect Nigerian banks as seen in the United States where three banks have failed.

He said banks remained sound and would not be affected by the impact of the collapse of two U.S. lenders and problems at Credit Suisse.

“MPC was convinced further rates hikes will not impact negatively on the banks,” he said.

“Subsidy removal will definitely push up inflation further so CBN’s anticipatory move is spot on if again it does happen,” former statistician-general Yemi Kale, who is now chief economist at KPMG Nigeria, said in a Twitter post.