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CBN’s increasing interest rate not enough to curb inflation – World Bank

THE World Bank has said that the Central Bank of Nigeria (CBN) might not effectively curb inflation by hiking the monetary policy rate (MPR)-known as the benchmark interest rate,adding that it poses a risk to economic growth.

It expressed the doubt in its ‘Global Economic Prospects‘ report released on Wednesday, June 12.

“Risks to Nigeria’s growth outlook are substantial, including the possibility that the tightening of monetary policy stops short of reining in inflation,” World Bank, a member of the Bretton Woods financial institutions, stated.

According to the World Bank, the failure of the CBN tightening policies to rein in inflation is one of the significant risks to Nigeria’s economic growth.

It stressed that the CBN increasing rate measures might not address the inflation issue which has significantly challenged the country’s economy.

The CBN aggressively raised the MPR known  by 750 basis points to 26.25 per cent in May since the beginning of the year to react to surging inflation which has risen to 33.7 per cent as of April.

Financial experts believe that the headline inflation will rise further in May. In its June Commodity Update report, the Financial Derivatives Company Limited projects inflation will increase by 0.63 percent to 34.32 percent in May.

In the Global Economic Prospects report, the World Bank predicted that Nigeria’s economic growth would remain modest at 3.3 percent in 2024 and 3.5 percent in 2025.

It stated that 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 highlighted the issue of public debt in sub-Saharan Africa, which is expected to remain elevated over the forecast period.

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

    The ICIR reported that Nigeria’s headline inflation rate rose to 33.69 percent in April for the 11th consecutive since President Bola Tinubu assumed office in May 2023.

    The inflation rate was 0.49 per cent higher than in March when it surpassed the highest record since 1999.

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