Highlights

Faced with a sharp Naira slump since mid-April 2024 and multi-year high Headline Inflation of 33.69%, the monetary policy committee had little or no choice than to increase the Monetary Policy Rate (MPR) by 150 basis points, bringing it to 26.25% in a move to help restore price stability and close the negative real return. All other parameters remain unchanged.

Expected Impacts

The hike is expected to create more attractive yields in the Nigerian fixed-income instruments as it will incentivise foreign investors seeking higher returns to invest, thereby leading to an inflow of capital. Although, the government’s focus on managing its borrowing cost and effective debt sustainability may also influence the direction of yields in the near term. Conversely, the hike is expected to increase the recent bearish sentiments in the equities market as investors continue to shift towards attractive yields in the fixed income market.

Click here “May 2024 MPC Decision – Further Contraction to Combat Multi-Year High Inflationary Pressures” to view the full report.

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