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- The central bank of Nigeria is expected to tighten its monetary policy further by raising its policy rate to 19.00% by end-2023.
- Consumer price inflation is expected to remain high due to elevated food prices, incentivising the central bank to continue tightening monetary policy.
- However, weakening economic fundamentals and pressure on Nigeria’s fiscal account may discourage the central bank from raising the policy rate beyond 19.00%.
The Central Bank of Nigeria is expected to tighten its monetary policy further to combat rising inflation, according to a recent report by Fitch Solutions. The report forecasts that the Central Bank of Nigeria (CBN) will increase its policy rate to 19.00% by the end of 2023 after already hiking by 50 basis points (bps) to 18.00% in March.
What It Means for Small Businesses and SMEs
On the one hand, the tightening of monetary policy means that borrowing money will become more expensive for small businesses and citizens, as interest rates on loans will likely increase. This could make it more difficult for small businesses to access the capital they need to grow and expand their operations. Additionally, with less money circulating in the economy, consumer spending and demand for small businesses may decrease.
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