The Central Bank of Nigeria (CBN) has revealed that only 36.3% of Nigerian households prefer an increase in interest rates to control inflation.
This is according to the July 2024 Inflation Attitudes Survey (IAS), part of the broader Household Expectations Survey, which was carried out by the CBN’s Statistics Department from July 22 to 26, 2024, with a response rate of 99.7%.
The survey, which sampled 1,665 households across the nation, sheds light on the complex dynamics between inflation, interest rates, and public sentiment in Nigeria.
50.6% prefer lower rates
Notably, the survey highlighted that 50.6% of respondents would prefer a reduction in interest rates, even as inflation continues to rise, while 13.1% were undecided.
This divide shows the challenge faced by the CBN’s Monetary Policy Committee (MPC) in balancing the need to curb inflation with the public’s demand for more affordable borrowing rates.
The majority of respondents expressed a desire for lower interest rates, despite acknowledging that such a move could exacerbate inflationary pressures.
This finding suggests a growing concern among Nigerians about the affordability of loans and the overall cost of living, which has been impacted by rising prices of essential goods and services.
63% of Nigerians dissatisfied with interest rate management in Nigeria
However, the survey also reveals a deep dissatisfaction with how interest rates are currently managed.
About 63.0% of respondents reported being dissatisfied with the management of interest rates, with 42.0% expressing that they were very dissatisfied.
This level of dissatisfaction indicates significant public discontent with the current monetary policy approach, suggesting that many Nigerians believe the current interest rate policies are not effectively addressing their economic concerns.
On the other hand, only 15.7% of respondents expressed satisfaction with the management of interest rates, highlighting a stark contrast between those who support the current policies and those who do not.
This low satisfaction rate shows the widespread sentiment that the economic challenges, particularly related to high borrowing costs and inflation, are not being adequately managed.
However, in terms of the perceived impact of rising prices, 80.9% of respondents believed that the economy would weaken if prices continued to rise rapidly, highlighting widespread concern about the negative effects of inflation on economic stability.
Only a small fraction (3.2%) believed that the economy would grow stronger in such a scenario, while 12.9% thought it would make no difference.
The survey also delved into public opinion on the relationship between interest rates and inflation. While 53.3% of respondents believed that an increase in interest rates would lead to higher prices in the short term, 49.8% held this view for the medium term (six to twelve months).
These findings suggest a general awareness of the complex interplay between monetary policy and inflation, though opinions on the exact effects remain divided.
What you should know
Nairametrics earlier reported that Nigerians are bracing for tough months ahead, with many planning to rely on borrowing and depleting their savings to manage their financial obligations amid a challenging economic landscape.
The surging inflation has left many Nigerians groaning under the weight of the skyrocketing cost of everything from food to fuel and rent.
It has also pushed Nigerians to borrow about N4.82 trillion from banks between January and March this year.
Under Yemi Cardoso’s leadership, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) has raised interest rates four times.
The first hike increased the rate from 18.75% to 22.75%, the second to 24.75%, the third to 26.25%, and most recently, in July 2024, the MPC raised the rate by 50 basis points to 26.75%.
These increases, totalling 800 basis points since Cardoso’s appointment, have been driven by efforts to tackle the country’s persistent inflation challenges, which include high core and food inflation.
While it is still high, Nigeria’s headline inflation rate decreased to 33.40% in July 2024, down from 34.19% in June 2024, according to a recent report by the National Bureau of Statistics (NBS). This marked the first decline in the headline inflation rate since December 2022, when it last dropped to 21.34%.
