IMF Forecasts 20% Inflation for Nigeria, Advises More Interest Rate Hikes
By Modupe Gbadeyanka
The Nigerian authorities, especially the Central Bank of Nigeria (CBN), have been advised to continue to tighten the monetary policy so as to moderate the double-digit inflation.
This was the major recommendation of the International Monetary Fund (IMF) to Nigeria at the ongoing 2023 Spring Meetings in Washington, DC, which started on April 10 and will end on April 16.
Last year, the central bank increased the benchmark interest rate, the Monetary Policy Rate (MPR), by 5.00 per cent or 500 basis points to 17.50 per cent in January 2023 from 12.50 per cent.
At its last Monetary Policy Committee (MPC) meeting in March 2023, the rate was further lifted by 50 basis points to 18.00 per cent, as inflation moved up by 21.91 per cent in February 2023.
Speaking at a press briefing on Tuesday, the Division Chief of the Research Department of the IMF, Mr Daniel Leigh, said the interest rate must be further hiked by Nigeria.
“One of our main recommendations is to tighten the monetary policy to ensure that this inflation comes down towards the more target levels,” he said.
Despite the high inflation, Mr Leigh said the Nigerian economy is “one of the most stable ones for this year.”
“We have a slight increase; we had 3.3 per cent in 2022; that is an upward revision, and for 2023, [it is] about the same, 3.2 per cent, [and] 3.3 per cent in 2024.
“This is an economy with very high inflation as well, and this is why we have a forecast of about 20 per cent for 2023,” he added.
The National Bureau of Statistics (NBS) is expected to release the inflation numbers for March 2023 in the coming days, and analysts are projection another elevation as a result of the cash crunch in the build-up to the general elections in February and March.
As for Nigeria’s rival, in terms of economy, South Africa, the global lender said it expects “a sharp slowdown to about 0.1 per cent growth this year. That is a -1.1 percentage point revision, and this mainly reflects the much more severe than expected outages in the energy sector, especially in the last quarter of 2022.”
“Next year, we expect more power to come online and the growth to recover to 1.8 per cent. More renewable power, in particular, should be connected,” Mr Leigh noted in a note made available to Business Post.