Economic experts knock CBN, Emefiele over 18% interest rate hike

The Central Bank of Nigeria (CBN) has come under fire from economists for raising the benchmark interest rate by 50 basis points to 18% from 17.5%. The announcement was made on Tuesday during the second Monetary Policy Committee (MPC) meeting of the year by the embattled CBN governor, Godwin Emefiele.

According to Emefiele, the committee decided to keep the asymmetric corridor at +100 and -500 basis points around the MPR. He explained that the small increase is intended to offset the effects of inflation and other economic concerns.

However, economists argue that the increase is unnecessary because the country is still dealing with the fallout from the apex bank’s naira redesign policy.

According to Professor Sheriffdeen Tella of Olabisi Onabanjo University, the CBN should have kept the MPR and focused on other issues. He questions the need for a rate increase, citing the fact that banks are currently not lending and are rationing cash.

Professor Uche Uwaleke of Nasarawa State University agrees with Tella, arguing that given the recent decrease in currency circulation and the slowing inflation rate, the MPC should have maintained a hold position.

According to Covenant University Professor Jonathan Aremu, the CBN should address the naira crisis before considering MPR adjustments because the cash shortage has stifled production activities.

According to Gabriel Idahosa, Deputy President of the Lagos Chamber of Commerce and Industry, the MPC’s rate hikes reflect a lack of understanding of Nigeria’s unique economic challenges, and that increasing non-oil exports is required to effectively address inflation.