The Central Bank of Nigeria will likely continue raising its key interest rate in the coming days and months to support a devalued naira, a Reuters poll found on Thursday, a strategy that could help create a healthier trade balance.
As some emerging market economies that began hiking rates sooner than richer nations begin to reverse course, Nigeria likely still has some significant tightening to do to turn its economy around after years of unorthodox policy.
The Central Bank of Nigeria (CBN) is expected to raise its monetary policy rate by 100 basis points to 19.50% on Tuesday, with the most aggressive forecasters predicting a hike double that size, the poll found.
“We expect Nigeria’s monetary policy rate to be raised by 100 basis points to 19.5% as reforms recently introduced will exacerbate near-term inflation that is already running close to record highs,” said Thomas Gillet, lead analyst for Nigeria at Scope Ratings.
However, forecasts were spread out almost equally between no change and hikes of 25, 50, 100, 150 and 200 basis points.
The CBN has raised rates 700 basis points since early last year in a bid to tame double-digit inflation, which was 22.79% year-on-year in June.
The bank allowed the naira currency to drop last month, days after newly elected President Bola Tinubu suspended the central bank governor who oversaw much-criticised multiple exchange rates. The currency is now hovering around 780 per U.S. dollar.
