Soaring Prices... Nigeria's Largest Interest Rate Hike in 6 Years

Central Bank Sets Rate at 13% After 150bp Increase

Bonny Island, Nigeria

[Asia Economy Reporter Cha Min-young] The Central Bank of Nigeria surprised markets by raising the benchmark interest rate by 150 basis points (1bp=0.01 percentage points) to 13% on the 24th (local time), according to foreign media including Bloomberg.

This move defied the expectations of most analysts who anticipated a rate freeze due to recent economic slowdown, and the hike was the largest in about six years since July 2016, when the rate was raised by 200 basis points.

Godwin Emefiele, Governor of the Central Bank of Nigeria, explained that the measure was an unavoidable step to curb worsening inflation. Price increases accelerated due to supply chain bottlenecks caused by Russia's invasion of Ukraine and China's COVID-19 lockdowns, pushing inflation to 16.8% in April.

Additionally, the naira's depreciation was partly driven by politicians in Nigeria, Africa's largest democracy, stockpiling dollars ahead of the February elections next year to fund their campaigns.

Nigeria's rate hike came at a time when other major central banks worldwide, such as the U.S. Federal Reserve (Fed) and the European Central Bank, are increasingly adopting hawkish (monetary tightening) stances.