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Nigeria Monetary Policy January 2023

Nigeria: Central Bank delivers another 100 basis point increase in January

At its 23–24 January meeting, the Monetary Policy Committee of the Central Bank of Nigeria delivered yet another 100 basis point increase that brought its key rate to 17.50%. The movement mirrored November’s increase. The decision was not unanimous regarding the size of the hike; four of the 12 members supported a 50 basis point increase, and one preferred a 150 basis point rise. Meanwhile, markets were not expecting any rate movements. The Bank did not introduce changes in the asymmetric corridor, the cash reserve ratio and the liquidity ratio.

The hike was driven by the persistence of upside risks to the inflationary outlook stemming from high energy prices, insecurity, foreign exchange pressures and increased spending ahead of the upcoming 25 February national elections. However, other policies such as the cash withdrawal limit and the redesign of naira bank notes are expected to lessen the amount of currency outside of banks. The Bank argued that the deceleration of inflation seen in December was not enough to change its monetary policy course. Regarding activity, the Committee noted that the economy performed well in H2 2022 and is expected to maintain this momentum in 2023, providing ample room for the hike.

While the press release was void of explicit forward guidance, the tone was hawkish; the Bank noted the necessity to continue tightening as inflation hurts growth and living standards.

The next meeting will take place on 20–21 March.

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