Economic experts have argued the recent hike of benchmark interest rate to 13 per cent from 11.5 per cent by the Central Bank of Nigeria at its last Monetary Policy Committee meeting would not have the desired effects on the rising inflation in the country.
The rate increase was implemented when the assumption of transitory inflation failed and the inflation rate climbed above 16 per cent. In theory, an increase in inflation is intended to reduce the amount of money in circulation, resulting in a decrease in the inflation rate.
Dr. Muda Yusuf, Founder/CEO of the Centre for the Promotion of Private Enterprise (CPPE) gave his insight on why the CBN interest rate hike would not have the desired effect on inflation.
Dr. Omobola Adu, a Research Analyst at GDL stated that the best-case scenario of MPC’s decision to hike interest rates could have a marginal effect in bringing inflation down.
Dr. Godwin Osuma, a researcher and lecturer in the department of Finance, Covenant University also added to the notion that the interest rate isn’t an effective tool.
He also advised that economic policy should be tailored to the Nigerian economic environment. He said, “The Nigerian economy shouldn’t treat its financial environment as those of other climes, the Stability of other macroeconomic variables needs to be considered in Nigeria, how can interest rates be increased when unemployment is still on the increase?”
