CBN hikes interest rates to record 26.75% to fight inflation

In a move aimed at curbing rising inflation, the Central Bank of Nigeria (CBN) has raised its benchmark interest rate, the Monetary Policy Rate (MPR), to a record high of 26.75%.

This represents a 150 basis point increase from the previous rate of 24.75%, marking the third consecutive hike this year.

CBN Governor, Olayemi Cardoso, announced this after the apex bank’s 296th Monetary Policy Committee (MPC) meeting in Abuja on Tuesday.

The decision comes against the backdrop of “historic high inflation levels,” according to Cardoso. Recent figures show inflation hovering around 33.69% in April 2024. The inflationary pressures are attributed to a combination of factors, including the removal of fuel subsidies and the floating of the Nigerian Naira.

READ ALSO:CBN finally takes over dormant accounts, to invest funds in treasury bills

The CBN’s strategy is to make borrowing more expensive, thereby discouraging spending and ultimately reducing demand in the economy. This, in theory, should help to cool down inflation. However, such a high interest rate can also have negative consequences, such as slowing down economic growth and making it more expensive for businesses to access loans for investment.

The effectiveness of this aggressive rate hike remains to be seen. Analysts will be closely monitoring key economic indicators in the coming months to gauge its impact on inflation and economic activity.

This decision by the CBN is likely to be a major talking point in Nigeria, with citizens grappling with the rising cost of living. The success of the bank’s efforts to combat inflation will be crucial for ensuring economic stability and fostering long-term growth.

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