Imagine you are in a car, driving down a long, winding road with no clear destination. The road ahead is riddled with bumps, sharp turns, and potholes, making every mile a test of endurance. For Nigerians, this journey mirrors their unending battle with inflation\u2014the ever rising costs of things that make life an uphill struggle.<\/p>\n
The Central Bank of Nigeria (CBN) has been behind the wheel, attempting to steer us safely through this uncertain terrain. This week, they pressed the accelerator again,\u00a0<\/span>raising\u00a0<\/span>the benchmark interest rate to 27.5% to regain control over rising inflation.<\/p>\n Why did CBN increase the rate again?<\/strong><\/p>\n CBN Governor Yemi Cardoso announced that the Monetary Policy Committee (MPC) unanimously agreed to\u00a0<\/span>hike\u00a0<\/span>interest rates. The decision comes as inflation continues its relentless climb\u2014not just year-on-year, but month-on-month as well. In October, inflation soared to 33.9%, a level not seen since 1996.<\/p>\n This price surge is mainly due to rising costs of food and fuel, coupled with a depreciating naira, which together are straining household budgets and squeezing business operations for many Nigerians.<\/p>\n At the same time, the naira has struggled this year, losing\u00a0<\/span>46%<\/strong>\u00a0<\/span>of its value against the dollar. This depreciation comes from efforts to let the currency float freely and address the ongoing dollar shortage. As a result, the cost of imports has soared, adding to Nigeria\u2019s inflation problems.<\/p>\n But they have been increasing rates. Why is inflation still going up?<\/strong><\/p>\n Despite the CBN\u2019s repeated interest rate hikes, inflation in Nigeria continues to rise, and the naira remains under pressure. This raises a pressing question:\u00a0<\/span>why isn\u2019t it working?<\/em><\/strong><\/p>\n Raising interest rates is a classic tool for controlling inflation, but it\u2019s only one piece of a larger puzzle. By making borrowing costlier, the CBN aims to reduce spending and cool demand. However, Nigeria\u2019s inflation is deeply rooted in structural problems that extend far beyond consumer behavior\u2014problems that interest rate hikes alone can\u2019t fix.<\/p>\n The core problem is\u00a0<\/span>supply-side inflation<\/strong>, which is driving up the cost of living, particularly in essential areas like food and fuel. Much of Nigeria\u2019s inflation is tied to rising food prices, which continue to climb sharply. Food inflation is particularly severe in urban areas, where supply chains are under more strain due to higher transportation costs and challenges in food preservation. As food gets more expensive in cities, the burden on consumers grows heavier.<\/p>\n To truly tackle inflation, the CBN\u2019s monetary policy must work hand-in-hand with solutions targeting these underlying challenges. Key issues like the high cost of production\u2014caused by a weakened naira, soaring fuel prices, and poor infrastructure\u2014are making it more expensive for businesses to produce and transport goods. These structural problems cannot be solved by interest rate hikes alone, underscoring the need for broader, more comprehensive reforms.<\/p>\n What does this mean for you?<\/strong><\/p>\n For most Nigerians, this means that the cost of living will remain high for the foreseeable future. With interest rates increasing, borrowing costs will increase, making loans and credit more expensive. While higher interest rates can lead to better returns on savings, inflation is still outpacing the benefits. This means the naira in your pocket is losing its purchasing power daily, especially for food and fuel.<\/p>\n","protected":false},"excerpt":{"rendered":" Imagine you are in a car, driving down a long, winding road with no clear destination. The road ahead is riddled with bumps, sharp turns, and potholes, making every mile a test of endurance. For Nigerians, this journey mirrors their unending battle with inflation\u2014the ever rising costs of things that make life an uphill struggle. […]<\/p>\n","protected":false},"author":1,"featured_media":4900,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"sfsi_plus_gutenberg_text_before_share":"","sfsi_plus_gutenberg_show_text_before_share":"","sfsi_plus_gutenberg_icon_type":"","sfsi_plus_gutenberg_icon_alignemt":"","sfsi_plus_gutenburg_max_per_row":"","_wp_convertkit_post_meta":{"form":"-1","landing_page":"0","tag":"0","restrict_content":"0"},"footnotes":""},"categories":[22,1],"tags":[],"class_list":["post-4899","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles","category-news"],"yoast_head":"\n