Nigeria’s high interest rate will stay for long — W’Bank

The bank said that in its latest Africa’s Pulse report, where it focused on how the inflation outlook varied across countries on the continent.

On Tuesday, the National Bureau of Statistics announced that the country’s inflation for September had accelerated to 32.70 after two consecutive months of decline, on the back of high fuel prices, which eroded the impact of the harvest season on food prices.

At the last Monetary Policy Committee of the Central Bank of Nigeria, the benchmark interest rate was hiked by 50 basis points to 27.25 per cent in a bid to rein in inflation.

In the Africa Pulse, the World Bank said that, unlike some other African countries that are already cutting the benchmark rate or holding it, the Central Banks of Nigeria, Angola and Sierra Leone would be considering the higher-for-longer approach.

“Central banks in countries that still have double-digit inflation and weakened domestic currencies (such as Angola, Nigeria, and Sierra Leone) will keep monetary policy rates higher for longer and, in fewer cases, they may increase their policy rates—particularly in countries where inflation rates still have not peaked.

“Broadly, currency weakness, slow fiscal adjustment, and cost pressures are among the factors driving these countries to keep a tighter stance for a longer period. For instance, Ethiopia, Ghana, and Nigeria are among the worst performing in Africa this year, and their currencies continue weakening while demand for foreign exchange remains pressing,” the World Bank report said.