Nigeria hikes interest rates to arrest highest inflation figure in 30 years

 

Yemi Cardoso, CBN governor

The Central Bank of Nigeria (CBN) has hiked interest rates by four percentage points on Tuesday, as trade unions protested over soaring food and fuel prices that have increased hardship in Africa's biggest economy.

CBN Governor Olayemi Cardoso said the rise in the bank's main lending rate to 22.75 per cent from 18.75 per cent was needed to arrest inflation, which has soared to its highest in almost three decades.

"The previous policy rate hikes have slowed the rise in inflationary pressure but not to a desirable extent. Members concluded that inflation could become more persistent in the medium term and pose more regulatory challenges if not effectively anchored," Cardoso told a news conference.

He said all 12 members of the Monetary Policy Committee participated in the rate decision, which was the first since Cardoso took office last September.

Economists had predicted a big hike but were divided on the size the central bank would go for.

Nigeria's international dollar bonds rose as Cardoso spoke, having fallen in price earlier in the day. The 2029 maturity was up the most, by about 0.3 cents to 95.5 cents, according to Tradeweb data.

Inflation has been spurred by bold but unpopular reforms implemented by President Bola Tinubu in his first year in charge, including ending a costly fuel subsidy and devaluing the local naira currency twice.

Tinubu has defended those reforms, saying they were needed to boost growth and attract investment, but they have prompted public anger and, in some cases, desperation.

On Friday, some people were killed and others injured when authorities ran out of stock at a food distribution centre in Lagos, causing a stampede, the Nigeria Customs Service said.

"The crowd became desperate and charged through our barricades in search of rice bags inside emptied containers," it said in a statement, adding that more than 5,000 people had showed up for the distribution.