Nigeria, South Africa, Egypt to Raise Interest Rates

The central banks of the three biggest economies in Africa are expected to raise interest rates in days to come in an effort to curb rising inflation rates.

In recent events, Africa, like its global counterparts has struggled to tame rising inflation rates amid the persistent increase in commodity prices, food shortage, weak economic fundamentals, and low purchasing power.

Central banks in Nigeria, South Africa, and Egypt, the three largest economies on the continent, could raise interest rates further this month in a move to cap escalating consumer prices and reduce the currency in circulation, according to a series of projections by economic experts.

In August 2022, inflation in Nigeria, Africa’s largest economy, grew at a 17-year high of 20.52% year-on-year despite efforts by the Central Bank of Nigeria (CBN) to rein in prices and cool the economy. The apex bank has raised interest rates by 150 basis points from 12.5% to 14% this year alone, there seems to be no solution in sight.

The persistent increase in prices at a period when the foreign exchange rate is at a record-high of N700/US$1 on the black market, the unemployment rate at 33.33%, foreign reserves below $40 billion, and retail sales below the norm, has forced the CBN to damn the consequence and consistent raise interest rates.

If the CBN moved as expected, the apex bank would have risen interest rates three times this year.

In South Africa, the second largest economy on the African continent, the story is not different as experts have started predicting that the Reserve Bank of South Africa will raise the monetary policy rate by 75 basis points from the current 5.5% to 6.25% this month.

Inflation rose to 7.8% in July, above central bank’s 3% – 6% inflation target.

As expected, economists surveyed by Bloomberg in its latest report, believed that with inflation at 14.6% in Egypt in the month of August, the central bank in Africa’s third-largest economy will likely move to curb rising prices.

Bloomberg noted that “while a minority of forecasters predict the benchmark deposit rate will stay at 11.25% for a third meeting, most see an increase of 50 to 100 basis points to curb annual inflation that hit its highest level in almost four years.”