IMF Calls For Hike In Interest Rate To Tame Inflation In Nigeria

The International Monetary Fund (IMF) has called for more interest rate hikes in Nigeria and other countries to curb continuous rise in inflation.

IMF made the call in a special report, titled, “In pursuit of stronger growth and resilience”.

The Fund noted that high inflation rate is the most immediate risk to economic growth in the African continent, the IMF called for further monetary tightening (interest rate hike) in Nigeria and other countries still experiencing high inflation rate.

In a bid to curb rising inflation rate, the Central Bank of Nigeria, CBN has raised its benchmark interest rate, the Monetary Policy Rate, eight times to 18.75 per cent in July from 11.5 per cent in April last year.

However, the inflation rate has continued to rise, reaching 25.8 per cent in August this year, the highest in 10 years.

Consequently, the IMF advised the CBN that further monetary tightening is appropriate in view of persistent rise in the inflation rate.

The IMF said: “In many cases, inflation is still high, public finances are still precarious, and confidence is still subdued. If they were to persist, these elevated imbalances would make the continent much more vulnerable to shocks.

“To ensure a more stable and sustained recovery, it is important that country authorities in Africa guard against any premature monetary policy easing and remain committed to their fiscal consolidation plans.

“Monetary policy efforts should remain tightly focused on price stability. This Is not only a priority to address the continent’s cost-of-living crisis but would also strengthen the credibility of central banks and overall macroeconomic resilience.

“In Africa, as elsewhere, the ability of the authorities to contain inflation amid global shocks owes much to improvements in policy frameworks over the last two decades.

“In many economies, advances in central bank independence, inflation targeting frameworks, exchange rate flexibility, macro prudential regulation, and communication have all played critical roles. However, actions to build on this progress and improved credibility are essential, particularly in light of the test posed by recent inflationary shocks.”