The World Bank has indicated that countries like Nigeria, Angola, and Sierra Leone, facing double-digit inflation and weakened currencies, are likely to maintain high interest rates for an extended period and may even raise them. This information was shared in the latest Africa’s Pulse report, which analyzed inflation trends across the continent.
In Nigeria, inflation spiked to 32.70% in September due to high fuel prices, despite two months of previous decline, prompting the Central Bank to raise its benchmark interest rate to 27.25%. Unlike some other African nations reducing or holding steady their rates, Nigeria, Angola, and Sierra Leone are expected to adopt a “higher-for-longer” approach according to the World Bank.
Factors such as currency weakness, slow fiscal adjustments, and cost pressures are driving these countries to maintain tighter monetary policies. Both Angola and Nigeria are taking steps to address social unrest linked to high living costs, such as doubling the minimum wage in Angola and partially reinstating fuel subsidies in Nigeria.
The World Bank also highlighted the depreciation of the Nigerian naira, which has seen a 43% year-to-date decline by August, making it one of the worst-performing currencies in Sub-Saharan Africa. The naira’s drop is attributed to increased demand for US dollars in the parallel market, limited dollar inflows, and delays in forex disbursements by Nigeria’s central bank, intensifying pressure on the currency.
In conclusion, the World Bank report underscores the challenges faced by these countries in managing inflation, currency devaluation, and monetary policies to ensure economic stability amidst external pressures.