Aiming to tackle inflation and stabilise the economy, the decision, announced by Governor Yemi Cardoso at the conclusion of the year’s final Monetary Policy Committee (MPC) meeting in Abuja, is a 25-basis-point increase from the previous 27.25%.  

This adjustment, the sixth such hike in 2024, comes as inflationary pressures keep increasing with Nigeria’s headline inflation climbing to 33.88% in October, as reported by the National Bureau of Statistics (NBS). 

The increase is a 1.18% month-on-month rise and a year-on-year surge of 6.55% compared to October 2023. Factors such as higher food prices and transportation costs have been key contributors to this inflationary trend.  

The MPC also maintained other parameters: the Cash Reserve Ratio (CRR) was held at 50% for Deposit Money Banks and 16% for Merchant Banks, while the Liquidity Ratio (LR) remained at 30%. The Asymmetric Corridor was retained at +500/-100 basis points around the Monetary Policy Rate (MPR).  

Explaining the decision, Cardoso noted that the committee unanimously agreed on the rate hike to address the “renewed inflationary pressures” observed in October. He noted that the measures were necessary to mitigate price instability and preserve economic stability.  

Economists have spoken about the potential impact of consecutive rate hikes on economic growth and loan repayment rates.

While the tighter monetary policy may help contain inflation, analysts argue that without complementary fiscal policies to address structural weaknesses—such as low productivity and inadequate diversification—the inflationary pressures may persist.  

Recent economic indicators further stress the challenges facing policymakers. Nigeria’s Gross Domestic Product (GDP) grew by 3.46% in the third quarter of 2024, driven primarily by the services sector. However, rising costs, a volatile naira, and declining oil production have exacerbated economic vulnerabilities.  

Analysts like Prof. Joseph Nnanna, Chief Economist at the Development Bank of Nigeria, has called for a change in focus from crude oil dependency to leveraging other untapped sectors to enhance productivity. 

Similarly, financial experts caution that the higher CBN interest rate could impact borrowers, leading to an uptick in loan defaults and non-performing loans for banks.  

Cardoso further noted the CBN’s focus on monitoring economic developments and implementing policies to achieve price stability.

The next MPC meeting is scheduled for January 2025, where further adjustments may be considered based on evolving economic conditions.  

This partnership is intended to support key sectors, including agriculture, infrastructure, housing, energy, and small and medium-sized enterprises (SMEs), addressing the demand for funding that is both accessible and viable for businesses operating in naira.

Through this collaboration, IFC will be able to mitigate currency risks while scaling up investments in Nigeria’s economy by targeting essential areas that drive growth and employment. 

The organisation has set a goal to inject over $1 billion in financing over the coming years, focusing on sectors that particularly benefit from local currency availability.

Governor Yemi Cardoso of the CBN noted that the agreement shows progress in Nigeria’s approach to enabling economic growth. 

He emphasised that the partnership between IFC and CBN will provide sustainable long-term financing solutions to private businesses at rates that support their expansion, bringing conventional intervention programmes to a more structured economic diversification model.

IFC’s Managing Director, Makhtar Diop, also commented on the initiative, pointing to the importance of providing affordable financing options in naira to meet the rising need for diversified funding solutions. He noted that this collaboration would spur lending activities within Nigeria, furthering job creation and economic stability.

The IFC currently maintains an investment portfolio in Nigeria, valued at approximately $2.13 billion, making it one of the largest portfolios in Africa. Local currency financing has become a priority for the organisation, with a vision to continue exploring innovative financial tools to expand its support across emerging markets.

As part of its global mission, the IFC mobilising private capital to create sustainable economic opportunities. The institution’s recent commitment of $56 billion to private companies in fiscal year 2024 is a drive to address development challenges in various countries through market-driven solutions and strategic partnerships.