The Monetary Policy Committee of the Central Bank may need to raise interest rates by at least 700 basis points before the year is out in order to reduce inflation, according to the Bank of America.
Tatonga Rusike, the bank’s sub-Saharan Africa economist, said in an interview with Bloomberg on Monday that the increase was required to combat the skyrocketing inflation brought on by the withdrawal of fuel subsidies and the unification of foreign currencies.
Rusike added that if the current trend continues, inflation may accelerate to 30% by the end of the year from 22.44% in May, stressing that the country’s top bank may need to raise rates.
According to him, “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.”
He added that, “It is less likely they (CBN) will do such level of increases.”
He added that international investors might be cautious about making investments in the nation if this decision was not made.
Reportedly, the CBN has been raising the interest rates in the nation since last year, smashing all previous records in the process.
The benchmark interest rate was further advanced by 0.5 percentage points to 18.50 percent from 18.00 percent in March during the Monetary Policy Committee’s latest meeting, held in May 2023.
The increase hasn’t, however, stopped Nigeria’s inflation from skyrocketing; it reached 22.41% in May 2023 as opposed to 22.22% in April 2023.
The National Bureau of Statistics stated in its report from last month that the increase in the average price of goods and services in the month under review was caused by a 24.82% increase in the inflation rate for food.
