The Bank of America has cautioned that the Central Bank’s Monetary Policy Committee may need to raise interest rates by at least 700 basis points by the end of the year to control inflation.
The bank’s sub-Saharan Africa economist, Tatonga Rusike, stated in an interview with Bloomberg on Monday that the increase was required to combat the skyrocketing inflation brought on by the removal of fuel subsidies and the unification of foreign currencies.
The nation’s apex bank may need to raise rates, according to Rusike, who noted that if the current trend continues, inflation may accelerate to 30% by the end of the year from 22.44% in May.
“By the end of the year, inflation may have accelerated from 22.4% in May to 30%, necessitating a monetary policy response from the central bank, or, more specifically, an increase in interest rates of at least 700 basis points.
And so, Rusike added that if this choice was not made, foreign investors could be hesitant to make an investment in the country.
He claimed that foreign inflows into the country are less likely if the negative real interest rate does not reverse, he also said that “it is less likely they will do such level increases.”
The benchmark interest rate was further advanced at the Monetary Policy Committee’s final meeting in May 2023, going from 18.00% in March to 18.50%.
The National Bureau of Statistics has ascribed the increase in the average price of goods and services during the month under review to the 24.82% increase in the rate of food inflation in its report from last month.
However, the increase has not halted Nigeria’s soaring inflation, which reached 22.41 percent in May 2023 as opposed to 22.22 percent in April 2023.
