Nigeria’s Central Bank has raised interest rates to 27.5% in its final meeting of the year after inflation quickened in October. The monetary policy committee lifted the benchmark interest rate by 25 basis points.

“The considerations of the meeting were held on the backdrop of renewed inflationary pressures as the headline food and core measures rose year on year in October 2024. Members therefore agreed unanimously to remain focused on addressing price developments,” Governor Olayemi Cardoso said at a media briefing on Tuesday.

The rate hike comes after Nigeria’s economy accelerated more than expected in Q3 2024. Nigeria’s GDP grew by 3.46%, driven by the services sector. 

The MPC has lifted the benchmark rate by 8.75% percentage points since the start of the year to crush inflation. Nigeria’s headline inflation quickened to 33.8% in October after a hike in fuel prices and floods in food-producing areas affected consumer prices. Most economists surveyed by TechCabal predicted a 25 basis point increase.

The new interest rate hike could see the net interest income of Nigerian banks get a further boost. The country’s four largest banks—Guaranty Trust Holding Co., Zenith Bank Plc, United Bank for Africa Plc, and FBN Holdings Plc—all reported that net interest income had more than doubled.

“[The hike] could lead to an increase in the loan default rate, thereby impacting the non-performing loans ratio,” said Samuel Onyekanmi, an analyst at Norrenberger. 

Analysts warn that Nigeria’s aggressive rate hikes without complementary fiscal efforts may not be enough to tame inflation.

“To put inflation to bed for good, the government needs to step up and reduce the structural vulnerabilities that have brought about inflation spikes. If that doesn’t happen, CBN is simply swimming against the tide, and the inflation fight will have no end in sight,” said David Omojomolo, Africa economist at London-based Capital Economics.