Nigeria’s Central Bank has raised its benchmark interest rate by 50 basis points to 26.75% in a bid to contain persistent food inflation despite three consecutive hikes.
The bank’s monetary policy committee announced the decision on Tuesday.
Members noted the continued rise in headline inflation was driven largely by food prices because of supply shortages and high cost of logistics distribution, bank governor Olayemi Cardoso said.
According to him, addressing food insecurity is key to containing inflation.
Economists had expected between a hike between 50 basis points and 75 basis points. According to Bloomberg, many economists expected the bank to raise the interest rate one more time before holding.
Between May 2022 and date, the MPC has raised the rate by 14.75 percentage points.
Andrew Natheny, economist at Goldman Sachs said “Nigeria would need to do something much bigger, much bolder, much more decisive if the central bank wants to arrest inflation and change the mindset of foreign investors. Another 50 or a 100 basis points is certainly not going to move the needle in the eyes of an investor.”
He said the continued weakening of the naira is stoking inflation.
But experts in Nigeria warned that raising the interest rate again risks stifling businesses and causing more hardship in a country already grappling with unprecedented economic problems that have pushed millions into poverty.
Inflation rose to 34.2% last month from 34% in May and the naira has slumped almost 6% against the dollar since mid-June, prompting the central bank to sell dollars to local foreign exchange bureaus to ease the domestic scarcity of the US currency.
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