The International Monetary Fund has recommended Nigeria’s Central Bank to raise interest rates at the upcoming Monetary Policy Committee meeting in order to combat the country’s high inflation rate.
Julie Kozack, the agency’s Director of Communications, made the announcement during a news conference on Thursday. The meeting transcripts were made available on the IMF website on Saturday.
According to Koszack, the CBN’s strategy of removing excess liquidity from the system has contributed to the country’s rising inflation.
“You asked a specific question on inflation. Inflation in Nigeria is running very high. It reached over 27 per cent in October, that is the year-on-year number.
“The Central bank, under its new leadership, has started to withdraw excess liquidity that was in the system and contributing to high inflation.
“The next Monetary Policy Committee meeting should further raise the policy interest rate. So, the Central bank is taking action to try to address the high inflation problem. As we mentioned in our Article IV Consultation, which was held in February of 2023, raising revenue from the very current low revenue-to-GDP ratio of 9 percent is essential to create fiscal space for social and development spending. 9 percent of GDP is a very low revenue to GDP ratio, and it is really not high enough to be able to support strong social safety nets, and development spending, to help protect vulnerable households and also to meet Nigeria’s development needs,” she said
She also commented on the 2024 budget, stating that it “aims to reduce the fiscal deficit while also creating space for these priority spendings, both on the social side and also on the development side.”
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