The Central Bank of Nigeria delivered an outsized rate hike yesterday, raising the country’s key interest rate by 100bp to 17.5 percent.
The Monetary Policy Committee’s (MPC) voting pattern was very hawkish, with seven of the twelve members voting for the 100bp hike, four members for a 50bp hike, and only one member for a 150bp hike. According to CBN Governor Godwin Emefiele, the aggressive hike was crucial as inflation has still been running hot, and therefore, a higher interest rate is necessary to rein in inflation.
While the annual inflation rate fell to 21.3 percent in December, the core measure, which reflects underlying price pressures, and month-on-month price growth, accelerated at the back end of 2022. Overall, the latest inflation data and central bank decision show that inflationary pressures in Nigeria have not eased sufficiently for the MPC to change its hawkish stance.