Nigeria’s central bank to meet today
The Central Bank of Nigeria’s (CBN) Monetary Policy Committee is expected to leave the bank’s 13.5% interest rate unchanged in today’s meeting.
Newly released data from Nigeria’s National Bureau of Statistics revealed inflation rose to 12.34%, its highest level since April 2018 and seventh consecutive monthly rise. Inflation could potentially rise to 14% by the end of the year due to a higher VAT tax and a weak naira. At the risk of exacerbating inflation, the CBN is unlikely to further cut rates in order to stimulate economic growth as it did last year.
In lieu of interest rate cuts, the government will need to provide direct support to small and medium sized businesses in order to curb inflation and stabilise the contracting economy. Local farmers and agribusinesses are a top priority as a weak exchange rate makes food imports increasingly expensive. Government support could take the form of cheap credit, tax incentives for capital investment, or guaranteed purchases of agricultural products that can be added to strategic reserves. The country risks entering a recession if restrictions imposed due to COVID-19 are compounded by an unsustainable rise in living costs, particularly food prices.
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