Nigeria hikes rates as warns inflation hurting economic growth

PUBLISHED: Tue, 22 Nov 2022 16:05:50 GMT
Chijioke Ohuocha and MacDonald Dzirutwe
The Nigerian Central Bank is seen in Abuja, Nigeria, Monday, December 11, 2006.
Bloomberg | Bloomberg | Getty Images

ABUJA, Nov 22 (Reuters) – Nigeria’s central bank raised its benchmark lending rate to 16.50% from 15.50% NGCBIR=ECI on Tuesday, as policymakers attempted to rein in inflation that was slowing down economic growth.

Inflation and the state of Africa’s biggest economy and top oil producer are major issues for voters as the country heads for a national election in February, when incumbent President Muhammadu Buhari will step down.

Annual inflation quickened to 21.09% NGCPIY=ECI in October, its ninth straight monthly rise, driven by rising prices of staples like bread, rice and maize and the cost of diesel, which is widely used to generate power.

“We believe that at 21.09% inflation is already hurting growth,” central bank governor Godwin Emefiele told a news conference.

He said 9 members of the 11-member monetary policy committee (MPC) voted for a 100 basis points increase, while 2 voted for 50 basis points.

Nigeria’s third quarter gross domestic product is expected later this week. Nigeria’s GDP grew 3.54% in the second quarter this year, down from 5.01% in the same period last year

The International Monetary Fund cut Nigeria’s growth forecast for 2022 to 3% from 3.4% earlier last week, citing lower oil production and the impact of recent floods in food producing regions of the country.

The IMF also said monetary conditions in Nigeria were accommodative despite tightening measures undertaken by the central bank because the main interest rate was still below inflation in October.

Emefiele switched in May from a loose monetary policy to support weak economic growth to a tight policy after inflation hit its highest level since 2005.

The bank has raised rates by a total of 500 basis points so far this year.

At the last MPC meeting in September, the bank raised its benchmark rate by 150 basis points, its highest level ever.

(Reporting by Chijioke Ohuocha and Camillus Eboh in Abuja and MacDonald Dzirutwe in Lagos; Additional reporting by Bhargav Acharya; Editing by James Macharia Chege)

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