CBN Faces Backlash for Benchmark Interest Rate Hike, Critics Warn of Economic Fallout

Economists and policy analysts have expressed concern about the recent actions taken by the Central Bank of Nigeria (CBN) concerning the benchmark interest rate and other monetary policy matters in the country. The Monetary Policy Committee of the CBN increased the benchmark interest rate to 22.75 per cent, aiming to manage the country’s inflationary pressures.

Paul Alaje, chief economist at SPM Professionals, noted that while the monetary policy committee is addressing inflation, the rate hike may significantly impact the economy. He predicted a rise in the unemployment rate and potential slowdown in GDP growth.

Muda Yusuf, Director of the Centre for the Promotion of Private Enterprise, criticized the MPC’s decision, stating that it would further impact the real economy, already facing macroeconomic difficulties. He highlighted that Nigeria’s inflation is largely driven by supply-side variables and the CBN’s ways of financing.

Former CBN deputy governor, Kingsley Moghalu, however, commended the CBN for the decision, describing it as a necessary step to address inflation. He emphasized the need to reduce the money supply to ensure price stability.

The rate hike may lead to higher borrowing costs for businesses, affecting operational expenses, product prices, and profit margins, especially amid challenging economic conditions. Critics argue that the increase in rates may discourage investment and slow down economic growth.

Despite the concerns raised, the CBN remains firm on its decision, aiming to control inflation and stabilize prices. The impact of these measures on the economy will unfold in the coming months, as businesses and consumers adjust to the new monetary policy environment.

Premium Times