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Nigeria Monetary Policy July 2022

Nigeria: Central Bank delivers another rate hike in July

Nigeria’s Central Bank continued to tighten financial conditions as it raised the monetary policy rate from 13.00% to 14.00% at its 18–19 July meeting. This marked the second consecutive increase. While the decision to hike the rate was unanimous, there was disagreement among the Monetary Policy Committee members over the size of the hike: Six members voted for a 100 basis point increase, while the remaining four preferred smaller hikes. Other monetary policy tolls were left unchanged.

In deliberating its decision, the Bank highlighted a “persisting uptick in headline inflation to 18.6% in June”. Inflation has largely been driven by factors outside the scope of monetary policy such as high energy prices, power supply disruptions, an electricity tariff hike, scarcity of fuel, and higher prices for fuel and food amid the war in Ukraine. The war has also affected Nigeria’s imports of agricultural inputs. That said, the Bank opted to act in order to safeguard purchasing power and economic growth. The Committee also noted that “the 150 basis points hike by the Committee in May 2022, had not permeated enough in the economy to halt the rising trend in inflation”.

The CBN seemingly turned more hawkish as it explicitly stated that neither standing pat nor loosening were options; the key argument was around the size of the monetary policy rate hike. Moreover, the Bank expressed that not curtailing price pressures could worsen poverty levels.

The next meeting is scheduled for 20–21 September.

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