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As the fight against rising headline inflation begins to get messy, Societe Generale has said that the Central Bank of Nigeria isn’t finished with monetary policy tightening.
The international financial institution is expecting the policy rate to hit 20% in the first quarter of 2023, according to MTnewswires report. In August, Nigeria’s headline inflation popped to 20.52%, according to the statistics office, a level seen seventeen years ago.
Societe Generale has now raised its interest rate forecast for 2022 from 16.50% to 17% after the central bank of Nigeria (CBN) raised the policy interest rate by 150 basis points to 15.50%.
Ahead of the policy committee meeting, Societe Generale had projected a 125 basis points interest rate hike, while Bloomberg consensus foresaw a 50 basis points increase -estimates ranged from 14% to 15%. MarketForces Africa had reported a 75 basis point hike based on data gathered from Nigerian investment bankers and economists.
All Monetary Policy Committee (MPC) members unanimously voted for an interest rate hike and the vast majority (10 out of 12) voted for a 150 basis points increment.
This was the third consecutive rate hike totalling 400 basis points since May, pointed out Societe Generale. The CBN also raised the cash reserve requirement (CRR) by 500 basis points to a minimum of 32.5%.
The next monetary policy meeting was scheduled for Nov. 22, the final meeting this year. Societe Generale maintained its view that the CBN will deliver an interest rate hike again and the bank raised its year-end policy rate forecast from 16.50% to 17.0%.
Since inflation was unlikely to dive below 20% year on year in the foreseeable future, Societe Generale expects the policy rate to rise to 20% by end-Q1 2023, assuming that the CBN will schedule two rate-setting meetings for the first quarter.
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