Cardoso CBN Likely To Maintain Current Interest Rate As Inflation Slows- Bloomberg

Nigeria’s Central Bank is likely to maintain the current interest rate due to the fall of inflation rate, Bloomberg said in a report.

According to the United States of America, USA based media company, Nigeria’s inflation rate has fallen to a six-month low in August, making a new hike in the rate almost  unnecessary.

The report comes ahead of the meeting of the CBN Monetary Policy Meeting, MPC next week. The MPC is the apex bank’s body responsible for fixing the benchmark interest rate in the country.

The MPC had during its last month meeting raised the Monetary Policy Rate, MPR,  or interest rates by 50 basis points, from 26.25 percent to 26.75 percent amid soaring inflation and skyrocketing food and commodities prices.

According to The Punch report citing the National Bureau of Statistics, NBS figures, consumer prices rose 32.2 per cent from 33.4 per cent in July. The figure matched the median estimate of nine economists in a Bloomberg survey.

The receding impact on prices of currency devaluation and the temporary removal of fuel subsidies instituted a year ago contributed to the slowdown. The measures formed part of reforms introduced by President Bola Tinubu after he entered office in May 2023 to attract investors, float the currency, and ease budget pressures.

Higher corn yields and a six-month window to import the crop and wheat duty-free also contributed to the softening in price increases.

Data collection was concluded before mid-August, so the effect of a 45 per cent increase in gasoline prices in early September, which saw a bump in transport costs, was not captured.

The slowdown raises the prospect that policymakers will pause a tightening cycle that’s lifted the benchmark rate to 26.75 per cent from 11.5 per cent in just over two years. It will also give the monetary policy committee, which will announce its decision on Sept. 24, time to assess the impact of recent currency volatility, devastating floods in northeastern Nigeria and the increase in gasoline prices on inflation.

Food inflation slowed to 37.5 per cent in August from 39.5 per cent a month earlier. Core price growth, which excludes agricultural produce and energy, quickened to 27.6 per cent from 27.5 per cent.

The CBN has consistently increases the benchmark rate for months, citing the need to tame inflation. The Governor of the bank, Yemi Cardoso said there is no other way out.