Nigeria's central bank on Tuesday raised its benchmark interest rate for the fourth time this year, as inflation surged to a 28-year high and the naira came under renewed pressure on both the official and parallel markets.
Central Bank of Nigeria Governor Olayemi Cardoso said the rise in the bank's main lending rate to 26.75% from 26.25% was needed to tackle inflation.
"While monetary policy has been moderating aggregate demand, rising food and energy costs continue to exert upward pressure on price development," Cardoso told a press conference.
Tuesday's decision by the bank's Monetary Policy Committee to hike the rate by 50 basis points comes after increases of 150 bps in May, 200 bps in March and 400 bps in February, its largest in around 17 years.
Analysts polled by Reuters had predicted a 50 bps hike, as inflation rose for the 19th straight month in Africa's most populous nation to 34.19% in annual terms in June.
"For now, we think that today's decision marks the final act in this hiking cycle," David Omojomolo, Africa economist at Capital Economics, said.
"But there's clearly a risk that further inflation surprises prompt the (central bank) to tighten monetary conditions further, either through outright rate hikes or by tweaking liquidity provision," he said, adding that rate cuts were unlikely until next year.
Last week, President Bola Tinubu's government agreed to raise the minimum wage to 70,000 naira ($44) a month after asking lawmakers to approve 6.2 trillion naira in additional spending to plug shortfalls in this year's budget, possibly stoking inflation further.
Price pressures have been spurred by Tinubu's administration slashing petrol and electricity subsidies and twice devaluing the local naira currency.
Cardoso has indicated that rates will stay high for as long as needed to bring down inflation.
The International Monetary Fund in May maintained its growth forecast of 3.3% for Nigeria's economy for 2024, up from 2.9% last year, citing a pick up in services and trade sectors.
It has welcomed the central bank's recent rate hikes to curb galloping inflation and called for a data-driven approach to further rate tightening while urging the bank to build up its forex reserves.
Latest Stories
-
Ghana Premier League is getting more interesting – Otto Addo
6 mins -
EC should audit voter’s register to clear bloated roll allegations – Kofi Abotsi advises
12 mins -
EC must be transparent and truthful to conduct peaceful election – Torgbiga Mawufeame Fugah
12 mins -
Ghana Energy Awards announces shortlisted nominees for the 8th edition
19 mins -
Apathy in Ashanti Region only exists in isolated cases – Manhyia South PC
31 mins -
TECNO AI Vision unveiled at IFA Berlin 2024
38 mins -
Akosombo Dam spillage reveals systematic failures in disaster readiness – Research
52 mins -
Akwasi Agyeman outlines benefits of NPP’s Travel Protocol Service
53 mins -
CICMG urges government to introduce LI to regulate credit market
59 mins -
NDC won’t have a sweet victory without Hohoe seat – Ablakwa
1 hour -
No Ghanaian should drink contaminated water – Engineer
1 hour -
Ghana’s biggest lender is not who you think
1 hour -
Calls for ban on small-scale mining unfair – Small-Scale Miners Association
1 hour -
Akufo-Addo’s anti-galamsey committee won’t succeed – GNAT
1 hour -
Don’t ban small-scale mining – Association to government
1 hour