Goldman Sachs experts claimed that Nigeria’s inflation was being exacerbated by the naira’s ongoing depreciation.
The experts are pushing for more than a 100 basis point increase in interest rates by the Monetary Policy Committee.
According to a Bloomberg article, the largest economy in Africa has seen little to no reduction in inflation, and the MPC would need to make a sizable rate change to significantly affect inflation.
Andrew Natheny, an economist at Goldman, said:
The naira has fallen about 6% vs the dollar since mid-June, and inflation has accelerated to 34.2% last month from 34% in May. As a result, the central bank sold dollars to local foreign exchange bureaus to help ease the domestic shortage of US currency.
Many analysts predict that the Central Bank of Nigeria will conclude its aggressive tightening campaign soon and raise interest rates one last time to boost the naira and curb inflation, which is close to a three-decade high.
The 12-member monetary policy committee, headed by Governor Olayemi Cardoso, is expected to hike interest rates by 75 basis points to 27%, according to the consensus estimate of six analysts surveyed by Bloomberg.
Analysts also urged the central bank to implement a more concrete strategy to address persistent naira weakness.
This should be expressed and shown by the CBN being a more regular and active player in the foreign exchange market, according to James Marshall, senior portfolio manager at Promeritum Investment Management LLP.
Nevertheless, experts predict that a raise on Tuesday will terminate the MPC’s cycle of tightening, which began in May 2022 and resulted in a 14.75 percentage point increase in rates.
Yvonne Mhango, Bloomberg Africa economist, said:
This is due to the expectation that inflation will begin to decline in July, which will be aided by favourable comparisons with the previous year and food-related policies like the creation of a 180-day window for duty-free imports of wheat and corn.
Additionally, they predict that the naira will remain stable at its current level with the help of anticipated dollar inflows, reducing inflationary pressures.
TimesNow.com.ng reported that as a result of the Central Bank of Nigeria’s (CBN) recent reforms, dollar inflows into Nigeria through International Money Transfer Operators (IMTOs) rose to the greatest level in at least six years.
According to a BusinessDay examination of statistics from the CBN’s most recent quarterly statistical bulletin, dollar inflows increased from $771 million in 2023 to $1.07 billion in the first three months of this year, a 39% increase.
Moreover, it increased from $965.3 million in Q4 on a quarter-over-quarter basis.
Proofreading by Nkem Ikeke, journalist and copy editor at TimesNow.com.ng.
Source: TimesNow.com.ng
