For the first time since 2015, Ghana’s Central Bank raised its benchmark interest rate, citing “significant” inflation risks as justification. Stakeholders are wondering if Nigeria will follow suit as the nation awaits the Central Banks of Nigeria’s final Monetary Policy Committee (MPC) meeting for this year (2021).

According to a statement from the Bank of Ghana’s Monetary Policy Committee, the rate was lifted by 100 basis points to 14.5 percent. The rate hike, which is the first since November 2015, reverses some of the 250 basis point reduction announced last year to help the West African country’s coronavirus-ravaged economy.

It comes as inflation advanced to a 15-month high of 11% in October, breaking beyond the top of the Central Bank’s goal zone of 6% to 10%, for the second month in a row. After recent statistics revealed increased momentum in the economy’s recovery from the impact of the coronavirus outbreak, the committee had room to manoeuvre.

What Ghana’s Central bank is saying 

The statement from Ghana’s MPC partly reads, ”Headline inflation has risen consistently from the low of 7.5% in May 2021 to 11.0% in October driven by both food and non-food price increases. In addition, all the Bank’s core measures of inflation have increased, indicating broad-based underlying inflation pressures, with the potential of de-anchoring inflation expectations.

“Currently, headline inflation is above the upper limit of the medium-term target band and the Committee noted significant risks to the inflation outlook. These risks include rising global inflation, high energy prices, uncertainties surrounding food prices and investor behaviour.”

The Committee further noted that these elevated inflationary risks, require prompt policy action to re-anchor inflation expectations to safeguard the central bank’s price stability objective.

The report added that given these considerations, the Committee had decided to raise the policy rate by 100 basis points to 14.5%.

Will Nigeria follow suit?

In Nigeria, on the other hand, inflation has slowed and growth has accelerated. Nigeria’s Central Bank’s benchmark interest rate of 11.5% has been maintained, ensuring increased economic spending. Inflation has levelled off after a substantial rise the previous year.

According to the National Bureau of Statistics, Nigeria’s inflation rate fell further to 15.99% in October 2021 from 16.63% in September 2021. Nigeria’s real GDP also increased by 4.03% in the third quarter of 2021, a slower rate than the previous quarter’s 5.01%.

Nigeria’s economy expanded for the fourth quarter in a row, indicating that the country is rebounding from the economic downturn brought on by the covid-19 epidemic last year. We can only wait and watch to see how the MPC members vote, but due to the slowing inflation rate and the revival of the economy, Nigeria’s Monetary Policy Committee has a strong incentive to keep the rate unchanged.