The World Bank has raised concerns over the effectiveness of the Central Bank of Nigeria’s (CBN) monetary policy tightening in addressing persistent inflation. In its latest global economic prospects report, the World Bank warned that Nigeria’s economic growth could be at risk if these policies fail to curb inflation. Despite the Monetary Policy Committee (MPC) raising interest rates significantly from 22.75% in February to 26.25% in May, experts caution that high rates may hinder borrowing, reduce productivity, and lead to job losses.
The report highlighted substantial risks to Nigeria’s growth outlook, predicting economic growth rates of 3.3% for 2024 and 3.5% for 2025. The Deputy Governor of the Financial System Stability Directorate at CBN, Philip Ikeazor, expressed concerns that aggressive rate hikes negatively impact the oil and manufacturing sectors, leading to rising input costs and low-capacity utilization. Similarly, Aloysius Uche Ordu from Brookings emphasized the need to tackle supply-chain challenges to reduce inflation.
CBN Governor Olayemi Cardoso acknowledged diminishing monetary factors contributing to inflation, but stressed the limited options available if hyperinflation occurs. Experts like Professor Uche Uwaleke and Dr. Muda Yusuf highlighted that Nigeria’s inflation is driven by supply-side factors and structural bottlenecks. They called for a balanced approach, where fiscal authorities address food inflation and infrastructure challenges, while the CBN manages inflation without excessively burdening businesses with high borrowing costs.