The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) has increased the interest rate by 50 basis points, bringing it to 26.75% from 26.25% in May 2024.
CBN Governor Olayemi Cardoso announced the decision during a press briefing on Tuesday at the conclusion of the two-day 296th MPC meeting in Abuja.
Governor Cardoso stated that the decision to raise the interest rate was driven by the need to address the country’s rising core inflation and food inflation, which stood at 34.19% and 40.87%, respectively, in June.
He emphasized that the MPC members are acutely aware of the escalating food prices in Nigeria, which necessitated the rate hike.
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The increase in interest rates means that businesses, farmers, manufacturers, and investors will face higher costs when borrowing from banks. This meeting marks the fourth time the interest rate has been raised since Cardoso’s appointment in September last year.
To recall, in May 2023, when President Bola Tinubu was inaugurated, Nigeria’s interest rate was 18.75%, and the inflation rate was 22.41%. Despite the CBN’s
Several analysts had previously said continuous interest rate hikes, inflation has not shown signs of cooling off.called for a pause in the interest rate hikes. Muda Yusuf, Director of the Centre for Promotion of Private Enterprise, supported this call, arguing that the monetary instruments had been overstretched and were no longer productive.
“I think we have overstretched monetary instruments because of inflation. They should put a pause on interest rate hikes,” Yusuf stated.