By Adedapo Adesanya
All indicators point to a continued hike in Nigeria’s interest rate in the first Monetary Policy Committee (MPC) meeting since President Bola Tinubu ascended to the highest office in government and booted out the Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele.
In the last meeting held in May, the CBN’s MPC, which makes the decision, raised the benchmark interest rate to 18.50 per cent from 18.00 per cent as inflation remained stubbornly high.
With Mr Emefiele out of office, developments in the last two months indicate that Nigeria will further review the MPR upward in the first meeting to be presided over by the acting CBN Governor, Mr Folashodun Shonubi, next week Tuesday (July 25).
After the President announced that moving forward, the government would no longer pay for costly fuel subsidies, prices of basic needs like food and transportation surged.
Nigerians soon had to contend with the unification of the exchange rate that sent the Naira to around N800 against the US Dollar and worsened the cost of imported goods.
There were also plans of a possible rise in electricity tariffs, which is being keenly contested.
Further hint that the rate hike will come yesterday after the National Bureau of Statistics (NBS) announced that inflation rose for the sixth month in a row in June to 22.79 per cent year-on-year from 22.41 per cent in May, putting pressure on the central bank to tighten policy further.
Inflation has been in double-digits in Nigeria since 2016 and for the entirety of his administration, former President Muhammadu Buhari targeted bringing the rate down to 9 per cent but to no avail.
Analysts have warned that the weakening Naira currency and the fuel subsidy removal will continue to push inflation higher in the short term.
On their part, CSL Stockbrokers Limited analysts, Mrs Gloria Fadipe and Mrs Sunmisola Ikoli-Oluwo, said in a note that, “We do not believe the monetary authorities will be willing to raise the policy rate much higher than current levels given the new administration’s perceived bias for low-interest rates.
“Going into the second half, we forecast at most a 150 basis-point rise in rates till the end of the year.”
Earlier this month, Bank of America (BOA) said Nigeria might need to hike interest rates to as much as 25 per cent to be able to tackle soaring inflation, according to its sub-Saharan Africa economist, Mr Tatonga Rusike said.
