Experts caution CBN against further hike in interest rate

Ahead of the Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) slated for February 26-27, 2024, leading investment banking firm, Comercio Partners Limited, has warned the apex bank against further increase of interest rate.

Such a move, the firm projected, will not augur well for the economy.

Comercio Partners gave this warning during a media launch to present the firm’s Macroeconomic Outlook for 2024, themed, “Finding Rain in Drought”.

Head of Research, Comercio Partners, Dr. Ifeanyi Ubah, said “I think the interest rate (Monetary Policy Rate, MPR) is already high and what we need to do is to emphasize that the transition mechanisms are right so that we can feel the impact of the high interest rate we already have.

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“If you do a correlation analysis between interest rate and inflation for Nigeria, we don’t see a relationship such that as you increase interest rates, there will be reduced inflation. Rather we see a positive correlation.

“This is unlike what obtains in other countries. If you look at the data on interest rate and inflation for Nigeria from 1960 till date and run a regression analysis you will see that they are positively correlated.

“So, if we are going by the data, increasing the interest rate will negatively affect the economy because you are going to increase misery and increase hardship considering the fact that our inflation is not credit driven. If it was credit driven, we will say it has a direct impact. But we have more supply shocks and imported inflation.”