Nigeria: Central Bank hikes in May; changes Governor in June
At its 23–24 May meeting, the Monetary Policy Committee of the Central Bank of Nigeria decided to increase the key rate to 18.50% from 18.00%. The move marked the seventh consecutive hike and brought total tightening since May 2022 to 700 basis points. All 11 committee members voted to raise rates, with 10 members favoring a 50 basis point hike and one member voting for a 25 basis point increase. The Bank did not introduce changes to the asymmetric corridor, the cash reserve ratio or the liquidity ratio.
The decision to continue hiking was driven by the sustained acceleration of price pressures; inflation ticked up to 22.2% in April from 22.0% in March. The Bank noted that the ongoing uptrend in inflation was driven by both demand- and supply-side dynamics and highlighted that, absent prior hiking, inflation would have reached a significantly higher level. It also noted that economic growth eased in Q1, which partly prompted a smaller interest rate hike relative to past meetings.
The press release was once again void of explicit forward guidance. That said, on 9 June, President Tinubu suspended the Central Bank’s Governor Godwin Emefiele due to an ongoing investigation into his office and his financial sector reforms. Folashodun Shonubi, the deputy governor for operations, has been appointed as acting governor. Going forward, this is set to drastically alter the Bank’s course of action.
The next meeting will take place on 24–25 July.