In the latest monetary policy meeting, Nigeria’s Central Bank has decided to increase interest rates to 27.5% as a response to rising inflation figures noted in October. The rate hike of 25 basis points was announced by Governor Olayemi Cardoso during a media briefing. This decision follows the country’s unexpected economic growth in the third quarter of 2024, with the GDP expanding by 3.46%, primarily driven by the services sector.
Since the beginning of the year, the Monetary Policy Committee has raised the benchmark interest rate by 8.75% to combat inflation, which escalated to 33.8% in October due to fuel price hikes and floods impacting food prices. The move is expected to benefit Nigerian banks by boosting their net interest income, although analysts caution that it might also lead to a rise in loan default rates.
Economists warn that aggressive rate hikes without corresponding fiscal measures may not be sufficient to control inflation effectively. They emphasize the importance of the government addressing structural vulnerabilities to achieve long-term inflation stability.