Analysts Predict Interest Rate Hike to 24.75% by CBN Today

By Dipo Olowookere

The Central Bank of Nigeria (CBN), through its Monetary Policy Committee (MPC), will likely increase the Monetary Policy Rate (MPR), also known as the anchor interest rate, by 200 basis points or 2.00 per cent to 24.75 per cent today, Tuesday, March 26, 2024.

This was the projection of analysts at Meristem Research in a note obtained by Business Post ahead of the rate-setting announcement later today.

The CBN commenced its MPC meeting yesterday and will address the media this afternoon on the outcome of the gathering, which has the CBN Governor, Mr Yemi Cardoso, as chairman and 11 others.

In the note, Meristem said the team would further push the rates higher to slow inflation in the country, which surged to 31.70 per cent in February, according to data released by the National Bureau of Statistics (NBS) some days ago.

At its last MPC meeting in February, the central bank was very aggressive with its decision, raising the MPR by 400 basis points or 4.00 per cent from 18.75 per cent.

The main reason for this was to make the cost of borrowing more expensive to bring down inflation. The rate was also raised to attract foreign portfolio investors (FPIs) to strengthen the Naira, and this is yielding positive results.

However, the bank is anticipated to adopt a less aggressive stance compared with the previous meeting because of the potential impact of higher interest rates on economic growth.

“We expect the committee to prioritise curbing inflation through a potential rate hike while maintaining a balanced approach towards managing system liquidity and exchange rate stability,” a part of the research note from Meristem said.

The company’s analysts stated that the apex bank should retain the liquidity ratio at 30 per cent, keep the asymmetric corridor at +100bps/-700bps around the MPR, and leave the Cash Reserve Ratio (CRR) at 45.00 per cent.

But it was emphasised that “any unexpected decision by the MPC could significantly impact market direction, reflecting the sensitivity of market sentiment to monetary policy decisions.”