CBN Set to Raise Interest Rates for Fifth Time in 2024

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The Central Bank of Nigeria (CBN) is expected to implement another interest rate hike during its Monetary Policy Committee (MPC) meeting on November 26, marking the fifth rate increase in 2023.

Nigeria’s battle with soaring inflation, which reached a staggering 33.8% in October, has necessitated this move. Rising fuel prices and disruptions to food production caused by flooding have exacerbated the inflationary pressures.

Analysts predict the MPC will raise the Monetary Policy Rate (MPR) by 25 to 100 basis points to curb inflation.

Governor Olayemi Cardoso emphasized the CBN’s commitment to controlling inflation and attracting foreign investment by maintaining positive real interest rates.

“The MPC noted that even though headline inflation trended downwards due to a moderation in food inflation, core inflation has remained elevated, driven primarily by rising energy prices,” Cardoso said.

“The uptrend poses severe concerns to members, as it clearly indicates the persistence of inflationary pressures.” he added.

However, experts caution that relying solely on rate hikes may not be sufficient to address the economic challenges.

“The Fx market is still experiencing pressure going by the forward rates of the dollar. FAAC just shared more than N1.4 trillion for October, higher than the figures for previous months. In the long run, continuous rate hikes may have limited impact on inflation. Nigeria needs to explore other economic measures to manage the crisis.” an analyst commented.

February: A historic hike of 400 basis points, raising the MPR to 22.75%, the largest single increase in 17 years.
March: Another hike of 200 basis points, bringing the rate to 24.75%.
May: A 150-basis-point increase, taking the rate to 26.25%.
July: A smaller adjustment of 50 basis points, raising the MPR to 26.75%.
September: A further 50-basis-point increase, setting the current rate at 27.25%.

Read: CBK Cuts Benchmark Lending Rates

Since assuming office, Governor Cardoso has overseen a cumulative 850 basis point increase in the MPR, from 18.75% to 27.25%.

These rate hikes have benefited Nigeria’s leading banks, including Guaranty Trust Holding Co., Zenith Bank Plc, United Bank for Africa Plc, and FBN Holdings Plc, which have reported a doubling of net interest income since the adjustments began.

Analysts had previously anticipated a pause in interest rate hikes following two consecutive months of declining inflation in August and a stabilization of the naira, which aligned official and parallel market rates after the central bank resumed regular dollar sales to currency dealers.