Increasing interest rate won’t control inflation, World Bank warns Nigeria

Increasing interest rate won’t control inflation, World Bank warns Nigeria 

 

Efforts to tame galloping inflation in Nigeria through continued hike in interest will not achieve such result, the World Bank has said.

The World Bank stated this, warning that the monetary policy tightening measures by the Central Bank of Nigeria (CBN) will not address the inflation issue in the country.

The World Bank disclosed this in its global economic prospects report released on Wednesday..

The tightening of the monetary policy rate (MPR) is the increase of interest rate aimed at controlling inflation.

The Monetary Policy Committee (MPC) has increased the interest rates this year from 22.75 per cent in February to 26.25 per cent in May, which is a total increase of 750 basis points.

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

The report also predicted Nigeria’s economic growth rate outlook for the rest of 2024 and 2025 to remain the same.

It said, “Growth in Nigeria is projected to pick up to 3.3 per cent this year and 3.5 per cent in 2025,” the World Bank said.

“After the macroeconomic reforms’ initial shock, economic conditions are expected to gradually improve, resulting in sustained, but still-modest growth in the non-oil economy.

“In addition, the oil sector is expected to stabilise as production somewhat recovers.”