By Adedapo Adesanya
The World Bank has said that the incessant raising of interest rates by the Central Bank of Nigeria (CBN) with the aim of bringing down inflation in the country has not been effective.
Inflation in Nigeria, according to the National Bureau of Statistics (NBS), increased by 33.69 per cent in April.
At its last Monetary Policy Committee (MPC) meeting, the central bank jacked up the Monetary Policy Rate (MPR) to 26.25 per cent last month.
On paper, the tightening of the MPR should control soaring inflation, but that has not happened in Nigeria, which the World Bank said may have been caused by other factors.
Since Mr Yemi Cardoso assumed office as the CBN Governor in September 2023, the interest rates have increased by 7.50 per cent from 22.75 per cent in February to 26.25 per cent in May.
The global lender in its economic prospects report released on Wednesday, warned that one of the risks of Nigeria’s economic growth is the failure to tighten policies on inflation.
“Risks to Nigeria’s growth outlook are substantial, including the possibility that the tightening of monetary policy stops short of reining in inflation,” a part of the report said.
The report also predicted Nigeria’s economic growth rate outlook for the rest of 2024 and 2025 to remain the same.
“Growth in Nigeria is projected to pick up to 3.3 per cent this year and 3.5 per cent in 2025,” the World Bank said.
“After the macroeconomic reforms’ initial shock, economic conditions are expected to gradually improve, resulting in sustained, but still-modest growth in the non-oil economy.
“In addition, the oil sector is expected to stabilise as production somewhat recovers,” it stressed.
Recall that during an interview with The Financial Times before the last MPC meeting, Mr Cardoso said he hoped that high rates would not be for too long and discourage investment and production, maintaining that raising rates had been essential.
“Hiking interest rates has had a dampening effect on the foreign exchange market, so that has begun to moderate. It’s not a zero-sum game. You lose on one side, you get on the other,” he said.
He also said that the MPC members would do whatever is necessary to get a handle on the country’s persistent inflation.
Modupe Gbadeyanka