Nigeria’s central bank raises benchmark rate to 24.75% to tame inflation

By Elisha Bala-Gbogbo and Chijioke Ohuocha

ABUJA (Reuters) -Nigeria’s central bank raised its monetary policy rate by 200 basis points to 24.75% from 22.75%, governor Olayemi Cardoso said on Tuesday, as the bank continued a tightening to head off soaring inflation.

This followed its largest rate hike in around 17 years last month, when the bank raised the rate by 4 percentage points to try to get price pressures under control.

Inflation is above 30% in annual terms, its highest in almost three decades, fanning a cost of living crisis that has left millions of people in Africa’s biggest economy and most populous nation struggling to meet their basic needs.

Cardoso told a press conference that Monetary Policy Committee (MPC) members were convinced they needed to continue with the tightening cycle to tame inflation but also saw price pressures moderating from May.

“Considerations of the committee at this meeting focused on the current inflationary pressures and the need to anchor inflation expectations as well as ensure sustained exchange rate stability,” he said.

The committee’s decision was just the second since Cardoso took office last September, as it did not hold a meeting under him until February.

Price pressures have been spurred by reforms implemented by President Bola Tinubu in his first year in charge, chiefly ending a costly fuel subsidy and devaluing the country’s naira currency twice.

Tinubu has defended those reforms as necessary to lift economic growth and attract investment, but they have prompted public anger and, in some cases, desperation.

David Omojomolo, Africa economist at Capital Economics said further tightening was expected in the next two MPC sittings before authorities ease off and keep rates steady.

“We expect Governor Cardoso’s desire to bring the inflation crisis to a close and also strengthen the naira will lead to more tightening,” said Omojomolo.

Nigeria’s sovereign international dollar bonds rose after the hike. The 2029 note jumped the most and was up 1.4 cents on the dollar to 97.9 cents at 1344 GMT, its highest level in almost two years, according to Tradeweb data.

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