Nigeria: Central Bank raises rates in September
Bank delivers surprise hike: At its meeting on 24 September, the Central Bank of Nigeria (CBN) raised the Monetary Policy Rate (MPR)—its key policy rate—by 50 basis points to 27.25%. Moreover, it also increased the Cash Reserve Ratio for Deposit and Merchant Banks. Meanwhile, it left unchanged the Liquidity Ratio and the asymmetric corridor around the MPR at plus 500 basis points to minus 100 basis points. The move ran counter to market expectations of a hold.
High inflation and a weak currency prompt a hike: The Bank highlighted that core inflation remains elevated, which underlines the persistence of price pressures. Additionally, the CBN said that real interest rates remain negative, thus limiting much-needed inflows of foreign capital to support the ailing naira. Against this backdrop, the Bank deemed it necessary to hike interest rates again.
Muted forward guidance: The CBN did not provide any explicit forward guidance; instead it said that it would monitor domestic and global developments to “ensure that the appropriate response is always deployed to address emerging risks”. Our panelists are currently revising their projections in light of the Bank’s latest decision. The Bank is scheduled to reconvene on 25–26 November for its last meeting of the year.