See expert reactions to CBN decision to increase interest rate

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Experts have reacted to the latest decision by the Central Bank of Nigeria to increase interest rate
The CBN announced on Tuesday that the monetary policy rate will now be 27.50 per cent in November from 27.25 per cent in September 2024.
Some of experts believe the CBN action will help naira and improve investment, others believe it is a big problem to business

Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.

The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) on Tuesday, November 26 increased the benchmark interest rate to 27.50% in November.

The new rate is a 25 basis point increase from the previous rate and represents a consecutive hike implemented in 2024 by the CBN to fight inflation.

Cardoso disclosed this during a press briefing on Tuesday after the 298th MPC meeting in Abuja.

Expert reacts to CBN MPC decision

Experts have voiced their opinions on the Central Bank of Nigeria's (CBN) decision to increase interest rates.

Punch reports that the labour movement and the Organised Private Sector have projected higher inflation and a weaker naira following the latest hike in the country’s interest rate to 27.50 per cent by the CBN.

Reacting to the development, Muda Yusuf, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, said:

“The Monetary Policy Committee’s continued hawkish stance has sparked concerns as Nigeria’s third-quarter GDP report highlights declining growth in critical sectors.“While the financial services sector grew by 32 per cent, agriculture and manufacturing recorded modest growth rates of 1.14 per cent and 0.92 per cent, respectively, with real estate, air transport, and textiles remaining in recession.“Key sectors like agriculture, manufacturing, and real estate are struggling and need monetary and fiscal support, not more restrictive policies.”

Similarly, Femi Egbesola, the National President of the Association of Small Business Owners of Nigeria, noted that the increase in the Monetary Policy Rate would continue to raise borrowing costs for businesses and individuals. He added that this would undoubtedly lead to more non-performing loans, loan defaults, and bad loans.

On the other hand, Bismark Rewane, the Managing Director/Chief Executive Officer of Financial Derivatives Company Limited, expressed support for the CBN’s interest rate hike.

However, he urged the CBN to prioritise stabilising the naira and controlling money supply growth to mitigate inflationary pressures.

"Under Cardoso, as the CBN governor, and his team, they have hiked rates six times between October last year and November this year. Cumulatively, they have increased the interest rate by 8.75%."The impact of this is that inflation has increased more slowly by 6.55 per cent; it could have been higher."

He added that the November hike is the smallest rate increase in 16 months and that the monetary policy tightening cycle may be nearing its end, assuming inflation can be tamed.

Reacting to the CBN’s interest rate hike in an interview, Uche Uwaleke, a finance and capital market professor and former finance commissioner in Imo State, stated:

"If I were a member of the MPC, I would have voted for a hold position as the aggressive policy rate hike is taking a toll on output. Production is stifled because of the very high cost of funds."

Experts predict as CBN meets to decide on interest rate

Earlier, Legit.ng reported that the National Bureau of Statistics announced that in October 2024, the inflation rate was 33.88% relative to the September 2024 headline inflation rate of 32.70%.

While food inflation in October 2024 was 39.16% on a year-on-year basis, 7.64% points higher than the rate recorded in October 2023 (31.52%).

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Source: Legit.ng

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