CBN reveals why interest rates will remain high in Nigeria

• The Governor of the Central Bank of Nigeria (CBN) has said the bank will continue to hike interest rates until inflation is tamed
• The CBN boss disclosed that the move is to control some of the risks associated with high inflation
• He disclosed that the outlook for Nigeria remains good and projected that inflation will crash by the end of this year

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.

The governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has said the bank would extend its monetary tightening position to control inflation.

The CBN boss said this in a recently published debut outlook, stating that the move is to mitigate some risks and address existing imbalances.

Governor of the Central Bank of Nigeria, Olayemi Cardoso Credit: CBN
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CBN to increase interest rates again

Cardoso said:

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“To mitigate some of the risks and address existing imbalances, it is imperative to intensify monetary tightening to subdue inflation risk, sustain reforms to strengthen the foreign exchange market and tackle security issues around the food-belt and oil installations,” he said.

Some of the risks he cited included heightened inflation due to long-standing structural imbalances, which would extend monetary tightening and depressed growth forecasts.

According to the CBN chief, oil theft, pipeline vandalism, and a decline in oil prices could also constrain fiscal space.

Cardoso projects reduced inflation

Cardoso disclosed that the outlook for the Nigerian economy shows broad resistance, with continued growth, expected inflation moderation and more excellent rate stability.

The latest inflation report by the National Bureau of Statistics shows that inflation rose by 34.19% in June due to rising food prices, 

The development comes as the monthly rates began to thaw in February but increased by 0.17% to 2.31%.

According to reports, Cardoso projected that inflation will moderate to 21.40% by the end of the year within an average of 19.84 and 25.35% from 28.92% recorded in December 2023, putting another rate hike in focus.

Dangote criticises high interest rates

Analysts have said Nigeria’s current interest rate of 26.25% is a put-off for investors.

The Chairman of the Dangote Group, Aliko Dangote, disclosed that economic growth will not occur if the interest rate remains at 30%.

He criticised the Central Bank of Nigeria (CBN) for its most recent interest rate increase, which brought it to nearly 30%. 

Dangote said businesses could not keep up with the present rate while addressing the audience on Tuesday at the banquet hall of the State House in Abuja. This was the opening session of a three-day summit organised by the Manufacturers Association of Nigeria (MAN). 

However, Dangote observed that "nobody can create jobs with an interest rate of 30%" during his remarks at Tuesday's manufacturer summit.

CBN sells 20,000 dollars each to BDCs

Legit.ng earlier reported that the Central Bank of Nigeria (CBN) has conducted another round of dollar sales to licensed Bureau De Change (BDC) operators.

The move, according to the CBN, is to ensure liquidity in the retail market demand for eligible invisible transactions.

According to a new circular released on Thursday, July 18, the apex bank is ready to sell $20,000 to licensed BDC operators at N1,450 per US dollar.

Source: Legit.ng