Will Nigeria go along with Ghana with the increment of its interest rate?

Since 2015, Ghana’s Central Bank raised its benchmark interest rate for the first time, citing “significant” inflation risks as justification. Stakeholders are wondering if Nigeria will follow suit as the nation awaits the Central Bank of Nigeria’s final Monetary Policy Committee (MPC) meeting for this year (2021).

According to a statement from the Bank of Ghana’s Monetary Policy Committee, the rate was lifted by 100 basis points to 14.5 per cent. The rate hike, which is the first since November 2015, reverses some of the 250 basis point reduction announced last year to help the West African country’s coronavirus-ravaged economy.

It comes as inflation advanced to a 15-month high of 11% in October, breaking beyond the top of the Central Bank’s goal zone of 6% to 10%, for the second month in a row. After recent statistics revealed increased momentum in the economy’s recovery from the impact of the coronavirus outbreak, the committee had room to manoeuvre.

The statement from Ghana’s MPC partly reads, ”Headline inflation has risen consistently from the low of 7.5% in May 2021 to 11.0% in October driven by both food and non-food price increases. In addition, all the Bank’s core measures of inflation have increased, indicating broad-based underlying inflation pressures, with the potential of de-anchoring inflation expectations.

“Currently, headline inflation is above the upper limit of the medium-term target band and the Committee noted significant risks to the inflation outlook. These risks include rising global inflation, high energy prices, uncertainties surrounding food prices and investor behaviour.”