Nigeria’s Interest Rates Under Pressure After Fuel Price Surge

• Nigeria interest rate hike might be paused by the petroleum price hike by 45%. 
• The monetary policy committee has scheduled the next meeting this September 23-24.

The recent hike in the petroleum price by 45% might continue to put pressure on the Central Bank of Nigeria to pause the interest rate hike meeting scheduled this month.  

The central bank has raised its interest rate by 15.25 percent since 2022, taking it to a record of 26.75% last July. The monetary policy committee of the Abuja-based bank’s have scheduled the next meeting on 23 and 24 of September. 

Nigeria’s central bank has raised its benchmark interest rate for the fourth time this year, as inflation surged to a 28-year high. The naira came under renewed pressure on both the official and parallel markets.

Moreover, the central bank governor, Olayemi Cardoso has mentioned in several meetings that the monetary policymakers are committed to defeating inflation. He further indicated last July that the key interest rate could decline in the not-too-distant future if price pressures moderated. 

Ayodeji Dawodu, an analyst at BancTrust Investment Bank Ltd. stated that they are expecting a broader shift toward monetary easing. Also mentions that might be premature this year despite inflation trending lower. Additionally, cutting the interest rate could deter the foreign currency inflows and induce pressure on the exchange rate. 

TUC Concerns Over the Hike

The Trade Union Congress of Nigeria (TUC) has expressed opposition to the hike. They have warned the government that it is likely to increase poverty among workers. The state-owned Nigerian National Petroleum Co. raised gasoline prices to 897 naira ($0.56) per litre, according to price display boards in three different NNPC-operated retail stations in Abuja. 

TUC reacted to the Nigerian government to immediately repeal the decisions, and to promote policies that strengthen the naira. The pressure is on the naira which declined to the five-month low of 1,625.88 per dollar, which heightened the inflation concerns. The currency’s year-to-date loss against the U.S. Dollar stands at 43%, and it is the worst performer globally after Ethiopia’s birr and the Lebanese pound. 

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