According to Bank of America, the Central Bank’s Monetary Policy Committee may need to raise interest rates by at least 700 basis points by the end of the year to combat inflation.

Tatonga Rusike, the bank’s Sub-Saharan Africa Economist, told Bloomberg on Monday that the raise was required to combat skyrocketing inflation caused by the withdrawal of fuel subsidies and the unification of foreign currencies.

Rusike noted that if current trends continue, inflation could reach 30% by the end of the year, up from 22.4 percent in May, implying that the country’s central bank may need to raise interest rates.

He further warned that if this decision was not made, foreign investors could be hesitant to invest in the country.

“Inflation may accelerate to 30% by the end of the year, up from 22.4% in May, necessitating a monetary policy response from the central bank, implying interest-rate hikes of at least 700 basis points.”

“If the negative real interest rate is not reversing, then it is less likely to see foreign inflows coming into the country,” Rusike said, adding that “it is less likely they (CBN) will do such level of increases,” he said.

According to reports, the CBN has been boosting the country’s interest rates in unprecedented steps since last year.

At its most recent Monetary Policy Committee meeting in May 2023, the benchmark interest rate was raised by 0.5% to 18.50%, up from 18.00% in March.

The increase, however, has not reduced Nigeria’s skyrocketing inflation, which reached 22.41 percent in May 2023, up from 22.22 percent in April 2023.

The National Bureau of Statistics ascribed the increase in average prices of goods and services in the month under review to a 24.82 percent increase in the food inflation rate in its report last month.