The Central Bank of Nigeria is expected to raise its benchmark interest rate today owing to the further increase in interest rate last month, analysts have said.
The Monetary Policy Committee of the CBN will conclude its two-day meeting today and announce its rate decision later this afternoon.
Nigeria’s headline inflation rate rose from 22.0 percent year-on-year in March to a fresh 17-year high of 22.2 percent in April.
“The breakdown made for worrying reading. Inflation rose across most major price categories, with core inflation hitting 20.1% y/y,” London-based Capital Economics said in a note.
“Against this backdrop, and with growing talk that the naira will be devalued and fuel subsidies cut once President-elect Bola Tinubu takes office later this month, we now think that the Central Bank of Nigeria will deliver a 50bp rate hike to 18.50 percent at next week’s MPC meeting,” they added.
Analysts at Lagos-based CSL Stockbrokers Limited believe that the MPC will continue to toll the way of other advanced countries such as the Bank of England and the Federal Reserve that have increased their interest rate by 25 basis points.
“We expect price pressures, elevated interest rates in advanced countries, and the need to attract foreign portfolio investors to remain top on the committee’s mind as the CBN has been clearly prioritising these concerns over growth,” they said. “We expect a very moderate 25bps increase in the monetary policy rate.”
They said capital inflows has continued to decline, and this remains a key concern for the committee.