The Central Bank of Nigeria raised interest rates for the sixth straight time this year, intensifying its quest to curb surging inflation and support the battered naira.
Governor Olayemi Cardoso told reporters in Abuja, the capital, on Tuesday that the monetary policy committee decided to lift the benchmark rate by 25 basis points to 27.5%. The increase was smaller than the median estimate of six economists surveyed by Bloomberg, who had expected a half-point hike.
He said the decision of the 12-member MPC was unanimous and there was “no going back” in the fight against inflation.
“Members reiterated their commitment to price stability as the bedrock of a thriving Nigerian economy,” Cardoso said. “We expect to see greater results in the first quarter of 2025.”
Nigeria’s annual inflation rate climbed to 33.9% in October, near its highest level since 1996, stoked by fuel and food price increases and persistent currency weakness, which makes imports more costly.
“With Governor Cardoso sounding optimistic that the effects of petrol price hikes and the naira’s large devaluations on inflation will soon fade, we think the monetary tightening cycle is now over,” said David Omojomolo, Africa economist at Capital Economics. “That said, we do not expect a turn to interest rate cuts until the second quarter next year.”
The naira has depreciated around 46% against the dollar this year, in part due to an effort to let it float freely after years of being pegged at an artificially strong exchange rate.
The unit has also suffered from poor liquidity, despite the central bank’s efforts to provide support by supplying scarce dollars to the local market to satisfy domestic demand for the US currency.
Still, Cardoso argued that since June, the naira has been relatively stable against the dollar.
Foreign exchange reform, alongside the rollback of costly fuel subsidies, were introduced by President Bola Tinubu after he took office in May 2023. The steps received plaudits from foreign investors and cries of protest at home, where the moves have inflamed a cost-of-living crisis.
The long-term goal is to make the economy more efficient and attractive to international investors. These fruits have been slow to arrive, though Nigeria surprised with better-than-expected annual growth of 3.5% in the third quarter after its services sector expanded at its fastest pace in almost two years.
By Nduka Orjinmo and Anthony Osae-Brown, Bloomberg
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