Nigeria delivers jumbo rate hike to tame inflation

NIGERIA’S Central Bank (CBN) has raised the benchmark lending rate by 400 basis points to 22.75 percent, from 18.75 percent in the most aggressive push to contain inflation.

Olayemi Cardoso, the CBN governor, announced this yesterday after the bank’s Monetary Policy Committee (MPC) meeting that began Monday.

The rate meeting, the first under Olayemi Cardoso, had been viewed by analysts as a test of the bank’s seriousness in curbing worsening inflation.

At least five policy experts surveyed expected a 200 basis point hike.

Cardoso would be secretly hoping that rate decisions translate to the economy. A gap already exists between the central bank’s policy rate, yields on the short-dated paper it sells at auction and what is offered on government debt.

Explaining the motive for the hawkish stance, Cardoso said MPC members were concerned about the persistent rise in the level of inflation and emphasized the commitment to reverse the trend.

“Previous policy rate hikes have slowed the rise in inflationary pressure but not to a desirable extent,” he said. “Members concluded that inflation could pose more regulatory challenges in the near and medium term if not effectively anchored.” According to him, non-monetary factors were driving inflation.

The rising cost of living has spawned protests in several of Nigeria’s 36 states. That prompted a call by a senior aide to President Bola Tinubu for Cardoso to monitor the political impact of his decisions, in a nod to the risks of a public backlash.

Tinubu appointed Cardoso in September as part of a complete makeover of the central bank’s leadership. – techcabal.com