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Bank of America warns that inflation in Nigeria might reach 30%

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According to Bank of America, the Central Bank of Nigeria’s Monetary Policy Committee may need to raise interest rates by at least 700 basis points by the end of the year to combat inflation.

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Tatonga Rusike, the bank’s Sub-Saharan Africa Economist, stated in an interview with Bloomberg that the increase was required to combat surging inflation caused by the withdrawal of fuel subsidies and the unification of foreign currencies.

According to the current trend, Rusike believes that inflation will reach 30% by the end of the year, up from 22.4 percent in May, and that the central bank may need to raise interest rates.

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Rusike cautioned that if the decision was not made, foreign investors would be hesitant to invest in the country.

“Inflation may accelerate to 30% by the end of the year, up from 22.4% in May, necessitating a monetary policy response from the central bank, implying interest-rate hikes of at least 700 basis points.”

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“If the negative real interest rate is not reversing, then it is less likely to see foreign inflows coming into the country,” Rusike said, adding that “it is less likely they (CBN) will do such level of increases,” he said.

Since last year, the apex bank has been raising the country’s interest rates, according to Information Nigeria.

At its most recent Monetary Policy Committee meeting in May 2023, the benchmark interest rate was raised by 0.5% to 18.50%, up from 18.00% in March.

The increase, however, has not reduced Nigeria’s skyrocketing inflation, which reached 22.41 percent in May 2023, up from 22.22 percent in April 2023.

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