The Event
On February 27, 2024, Nigeria’s Monetary Policy Committee (MPC) made a bold move, increasing the monetary policy rate by a substantial 400 basis points to 22.75%. This decision, which aims to tackle inflation that reached a 28-year high of 29.9%, was coupled with an increase in the cash reserve ratio to 45%. These measures signal a firm commitment to tightening monetary policy and stabilising the economy, aligning Nigeria more closely with global economic trends and seeking to restore confidence in its financial markets.
Macroeconomic implications
In the wake of this rate hike, treasury bill rates have risen sharply from 12.24% in December 2023 to 19% as of February 21, 2024, indicating the market's immediate reaction. This uptick is expected to attract more investment, especially in portfolio investments, suggesting a short-term positive trend for investors. For context, foreign portfolio investments are down 53% between 2022 and 2023.
However, this optimism is tempered by
