The Bank of America has warned that Nigeria’s inflation rate could hit 30% by the end of the year if the Central Bank does not take drastic measures to curb rising prices.
In an interview with Bloomberg on Monday, Tatonga Rusike, the bank’s sub-Saharan Africa economist, said that the Monetary Policy Committee (MPC) may need to increase interest rates by at least 700 basis points before the end of the year.
Rusike said that the current inflation rate of 22.4% is already “uncomfortably high” and that it is likely to continue to rise in the coming months due to a number of factors, including the ongoing war in Ukraine, which has caused global food and energy prices to surge.
He added that the MPC is likely to be under pressure to increase interest rates in order to bring inflation under control, but that this could have a negative impact on economic growth.
“The MPC is in a difficult position,”
“It needs to raise interest rates to curb inflation, but it also needs to keep economic growth on track.”
Rusike said
The MPC is scheduled to meet next on July 25th. It is expected to announce its decision on interest rates at the end of that meeting.
If the MPC does decide to increase interest rates, it would be the first time that it has done so since May 2020. The current interest rate is 11.5%.
A 700 basis point increase in interest rates would be a significant move and would likely have a major impact on the Nigerian economy. It would make it more expensive for businesses to borrow money and could lead to a slowdown in economic growth.
However, it could also help to bring inflation under control and protect the purchasing power of ordinary Nigerians.
The MPC will need to weigh the risks and benefits of increasing interest rates before making a decision. It is a difficult decision, but one that is essential for the health of the Nigerian economy.
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