• Wednesday, July 24, 2024
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World Bank to CBN: Interest rates hike not enough to tame inflation

The World Bank has expressed doubts over the Central Bank of Nigeria’s ability to effectively rein in inflation through its aggressive monetary policy tightening approach.

The Bank, in its Global Economic Prospects report sighted by BusinessDay on Wednesday, revealed that one of the major risks to Nigeria’s economic growth is the failure of these tightening policies to curb the stubbornly high inflation.

“Risks to Nigeria’s growth outlook are substantial, including the possibility that the tightening of monetary policy stops short of reining in inflation,” the World Bank said.

The CBN’s chief, Olayemi Cardoso, since assumption of office has continued to dole out inflationary targeted policies but it has failed to bring the now 28-year high inflation down.

The CBN has increased the country’s interest rate thrice in less than a year, straining the already struggling small and medium enterprises from accessing loans.

The monetary policy rate (MPR) was increased by a combined 750 basis points since February, reaching 26.25 percent in May yet inflation rate keeps rising. It stood at 33.69 percent in April and is expected to rise albeit mildly this month.

The World Bank warns that even as the CBN maintains a hawkish stance against inflation, it may not be enough to address the menace.

The report predicts that Nigeria’s economic growth will remain modest, at 3.3 percent this year and 3.5 per cent in 2025.

The non-oil economy is expected to experience sustained growth, while the oil sector is expected to stabilize as production recovers.

The World Bank also highlights the issue of public debt in sub-Saharan Africa, which is expected to remain elevated over the forecast period.

“If global interest rates remain high, debt-service costs for countries in the region may rise, increasing the risk of government debt distress,” the Bretton woods institution said.