IMF calls for interest rate increase in Nigeria to address high inflation

By Sodiq Adelakun

The International Monetary Fund has urged the Central Bank of Nigeria to hike the interest rates in the next Monetary Policy Committee to address the country’s high inflation rate.

The agency’s Director of the Communications Department, Julie Kozack, disclosed this during a press conference held on Thursday. The transcripts of the conference were published on the IMF website on Saturday.

Koszack noted that the CBN’s policy of mopping up excess liquidity from the system has contributed to the growing inflation in the country.

“You asked a specific question on inflation. Inflation in Nigeria is running very high. It reached over 27 percent 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.”