The Bank of America has said the Monetary Policy Committee of the Central Bank may need to increase interest rates by at least 700 basis points before the end of the year to curb inflation.
In an interview with Bloomberg on Monday, the bank’s sub-Saharan Africa Economist, Tatonga Rusike, said the hike was necessary to tackle soaring inflation occasioned by the fuel subsidy removal and unification of foreign exchange.
Rusike explained that at the current trend, inflation may quicken to 30 percent by the end of the year from 22.4 percent in May, noting that the nation’s apex bank may need to push up rates.
He further warned that if this 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 levels of increases.”
The Punch reports that the CBN, in record-breaking moves, has been increasing the country’s interest rates since last year.
At its last Monetary Policy Committee meeting held in May 2023, the benchmark interest rate was further pushed forward by 0.5 percent to 18.50 percent from 18.00 percent in March.
The raise has, however, not slowed Nigeria’s soaring inflation, which hit 22.41 percent in May 2023 compared with 22.22 percent in April 2023.
In its report last month, the National Bureau of Statistics attributed the increase in the average prices of goods and services in the month under review to the 24.82 percent jump in the food inflation rate.
