By Niyi Jacobs
The Central Bank of Nigeria (CBN) has raised the interest rate to 26.75%, a move aimed at tackling the country’s soaring inflation rate, which stood at 34.19% in June. However, the decision has sparked a mixed reaction among economists and analysts, who warn that the rate hike could have both positive and negative consequences for the economy.
On one hand, the higher interest rate is expected to attract foreign investors and strengthen the Naira, as investors seek higher returns in a high-interest-rate environment. This could lead to an influx of foreign capital, boosting the economy and stabilizing the currency.
On the other hand, experts caution that the rate hike could stifle economic growth, as higher interest rates make borrowing more expensive for individuals and businesses. This could lead to reduced consumer spending, lower investment, and slower economic growth.
Uche Uwaleke, a professor of capital market, noted that “the rate hike will further increase the cost of borrowing, which could lead to reduced economic activity and slower growth.”
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, added that “the CBN’s approach is too narrow, focusing solely on interest rates. A more holistic approach is needed to address inflation and economic growth.”
CBN governor Olayemi Cardoso, however, emphasized the need to address rising food prices and inflation, stating that “the rate hike is a necessary step to ensure price stability and maintain economic growth.”
As the debate rages on, one thing is clear: the CBN’s decision to hike the interest rate to 26.75% will have far-reaching implications for Nigeria’s economy. Only time will tell if the move will achieve its intended goals or have unintended consequences.
