IMF, Fitch Applaud CBN’s Interest Rate Hike, Lauding It as a Positive Policy Decision

The recent increase in Nigeria’s interest rate by the Central Bank of Nigeria (CBN) has garnered praise from international financial institutions, with both the International Monetary Fund (IMF) and Fitch Ratings endorsing the move as a step in the right direction.

IMF, in its end-of-mission press release following consultations and assessments in Nigeria, commended the interest rate hike as a positive measure to contain inflation and stabilize the economy. The organization recognized the challenging economic situation inherited by President Bola Tinubu’s administration and emphasized the importance of addressing immediate priorities such as food insecurity.

Fitch Ratings echoed similar sentiments, stating that the 400 basis points increase in Nigeria’s Monetary Policy Rate (MPR) marked progress in the country’s efforts to combat inflation. The rating agency highlighted the significance of monetary policy tightening in controlling inflationary pressures and restoring macroeconomic stability.

The CBN’s Monetary Policy Committee (MPC) raised the policy rate by 400 basis points to 22.75%, marking a total tightening of 1,025 basis points since May 2022. The decision reflects the committee’s commitment to addressing inflation and stabilizing the exchange rate amidst prevailing economic challenges.

IMF’s visit to Nigeria included consultations with key government officials, including the Minister of Finance and the Governor of the Central Bank of Nigeria. Discussions focused on economic outlook, growth projections, and policy measures aimed at addressing inflation and food insecurity.

Fitch Ratings also emphasized the importance of continued policy tightening by the CBN to control inflation and restore investor confidence in the foreign exchange market. The agency projected inflation to rise further in the first half of 2024 before moderating in the second half, citing currency depreciation and security challenges as contributing factors.

While recent measures indicate progress in addressing monetary and foreign exchange market challenges, Fitch cautioned that sustained efforts would be required to strengthen Nigeria’s medium-term growth prospects and attract external financing. The agency emphasized the need for improved policy coordination and fiscal consolidation to support long-term economic stability.

Overall, IMF and Fitch’s endorsements of the CBN’s policy decisions reflect confidence in Nigeria’s commitment to addressing economic challenges and fostering sustainable growth. However, continued efforts will be essential to maintain momentum and achieve lasting improvements in the country’s economic outlook.