Macroeconomic Report & Economic Updates

Nigeria Economic Update (Issue 11)

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), in its 147th meeting, has raised the Monetary Policy Rate (MPR) to 18 percent.1 This represents an increase of 50 basis points from the previous MPR of 17.5 percent. The apex bank attributes this sixth consecutive increase in the MPR since April 2022 to rising inflation in the country, with issues such as the anticipated fuel subsidy removal, exchange rate pressure, and rising energy prices in view, and is a bid to curb rising inflation. The recent inflation figures show that inflation has risen to 21.91 percent as of February 2023 despite the cash crunch in the country and defying the policy measures put in place by the CBN in recent months.2 Hence, Nigeria’s rising inflation levels exhibit structural patterns driven by supply-side variables. Consequently, as the MPR has not been effective in curbing inflation in the country, the CBN should aim to tackle the structural drivers of inflation. Continuous MPR increases could be bad for business growth since they could deter companies from borrowing because doing so would increase the cost of borrowing, which could then raise inflation. So, rather than supporting any future hikes in the MPR, the apex bank should address other issues, such as high energy prices, high transportation costs, and a lack of foreign currency that frequently raise production costs.

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