Market News

By Nduka Orjinmo and Anthony Osae-Brown

(Bloomberg) -- The Central Bank of Nigeria raised interest rates for the sixth straight time this year, intensifying its quest to curb surging inflation and support the battered naira.

Governor Olayemi Cardoso told reporters in Abuja, the capital, on Tuesday that the monetary policy committee decided to lift the benchmark rate by 25 basis points to 27.5% and said there was “no going back” in the fight against inflation.

“Members reiterated their commitment to price stability as the bedrock of a thriving Nigerian economy,” Cardoso said. “We expect to see greater results in the first quarter of 2025.”

The hike was less than the median estimate of six economists surveyed by Bloomberg, who had expected a half-point hike.

The move narrows the gap between the benchmark rate and inflation, which had widened after price pressures rose last month. That thwarted Cardoso’s efforts to push real, inflation-adjusted interest rates, toward positive territory.

Higher Inflation

Nigeria’s annual inflation rate climbed to 33.9% in October, near its highest level since 1996, after fuel and food price increases and persistent currency weakness, which makes imports more costly.

Cardoso said higher food and fuel prices had contributed to the uptick in inflation pressures.

The naira has depreciated around 46% against the dollar this year, in part due to an effort to let it float freely after years of being pegged at an artificially strong exchange rate.

The unit has also suffered from poor liquidity, despite the central bank’s efforts to provide support by supplying scarce dollars to the local market to satisfy domestic demand for the US currency.

Still, Cardoso argued that since June, the naira has been relatively stable against the dollar.

Foreign exchange reform, alongside the rollback of costly fuel subsidies, were introduced by President Bola Tinubu after he took office in May 2023, receiving plaudits from foreign investors and cries of protest at home, where the moves have inflamed a cost-of-living crisis.

The long-term goal is to make the economy more efficient and attractive to international investors. These fruits have been slow to arrive, though Nigeria surprised with better-than-expected annual growth of 3.5% in the third quarter after its services sector expanded at its fastest pace in almost two years.

--With assistance from Simbarashe Gumbo.

(Updates with Cardoso comments in third paragraph..)