The Central Bank of Nigeria (CBN) has increased its benchmark interest rate for the sixth time this year, aiming to control soaring inflation and stabilize the naira. Governor Olayemi Cardoso announced in Abuja that the Monetary Policy Committee (MPC) raised the policy rate by 25 basis points, bringing it to 27.5%. This hike was lower than the expected 50 basis points predicted by economists surveyed by Bloomberg.
Cardoso emphasized the MPC’s unanimous decision and commitment to tackling inflation, which has reached 33.9% in October—its highest level since 1996. The inflation spike has been driven by rising fuel and food costs, as well as ongoing currency depreciation. Despite the economic challenges, Cardoso remains optimistic, stating, “We expect to see greater results in the first quarter of 2025.”
David Omojomolo, an Africa economist at Capital Economics, suggested that the monetary tightening cycle might be nearing its end, although interest rate cuts are unlikely before the second quarter of 2025.
The naira has weakened by around 46% against the US dollar this year, partly due to the CBN’s decision to float the currency after years of maintaining an artificially strong exchange rate. Liquidity challenges persist, but Cardoso noted that the naira has shown relative stability since June.
Reforms, including the removal of fuel subsidies and foreign exchange liberalization, were introduced by President Bola Tinubu after taking office in May 2023. While these measures have earned praise from foreign investors, they have also exacerbated the cost-of-living crisis in Nigeria. Nonetheless, the economy showed resilience, posting better-than-expected growth of 3.5% in the third quarter, bolstered by a rapidly expanding services sector.
