A small but notable portion of Nigerians believes that increasing interest rates would be the key to improving the country’s economy.
According to the Central Bank of Nigeria’s (CBN) August 2024 Household Expectations Survey, 11.4% of respondents expressed the opinion that higher interest rates would provide economic benefits.
However, there was an overwhelming preference for lower interest rates based on the survey,
Also, the broader sentiment, however, remained cautious, with the survey reflecting a general apprehension towards spending and borrowing in the current economic climate.
Respondents also highlighted concerns over inflation, with many expecting further price increases in transportation, food, and medical expenses in the coming months.
67.4% prefer lower rates
The CBN survey reveals that 67.4% of Nigerians believe that lowering interest rates would significantly improve the country’s economy.
According to the August 2024 Household Expectations Survey, which sampled 1,665 households across the nation, the majority of respondents expressed that lower interest rates would be more beneficial for the economy, while 10.3% preferred no change and 11.4% thought higher interest rates would yield better results.
The CBN survey report read: “households were asked whether it would be better for the Nigerian economy if Interest Rates were to increase or decrease. The responses indicated that 67.4 percent believe the economy would benefit from lower Interest Rates, 10.3 percent prefer no change, and 11.4 percent think higher Interest Rates would be better. Meanwhile, 11.0 percent were unsure.”
This sentiment comes amid persistent economic challenges, including inflationary pressures that have severely impacted the purchasing power of many Nigerian households.
Nigerians expect further increase in bank loan rates
The survey also showed that 60.8% of respondents felt that interest rates on bank loans had risen over the past three months, reflecting growing concerns over the cost of borrowing in the current economic climate.
Expectations for the next three months mirrored these concerns, with 53.8% anticipating further increases in interest rates on loans.
Beyond interest rates, the survey provided valuable insights into household expectations regarding inflation.
Nigerians expect inflation to fall in next six months
Although inflation remains a major concern, respondents showed a slightly more optimistic outlook on its trajectory, with many expecting a gradual decline over the next six months.
While the current inflation perception index stood at -68.2 points, projections for the next three and six months indicated a slow improvement, with indices of -37.5 and -29.9 points respectively.
The survey also highlighted growing anxiety about spending on essential goods and services. Respondents expected significant price increases in key areas such as transportation (77.5 points), food and household items (71.7 points), and medical expenses (69.2 points).
In the next three months, they anticipated the cost of housing, transportation, and education to rise further, reflecting concerns about the broader economic environment and its impact on household finances.
In terms of purchasing decisions, the survey showed that most Nigerians are reluctant to buy big-ticket items such as cars, houses, or consumer durables due to their perception of unfavorable buying conditions.
The Buying Conditions Index for the current month stood at a low 14.8 points, indicating that consumers do not believe this is an ideal time for such purchases. Even over the next six months, expectations for buying conditions remained low at 25.3 points, showing limited optimism.
What you should know
Nairametrics earlier reported that only 36.3% of Nigerian households prefer an increase in interest rates to control inflation as of July 2024.
Notably, the July 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.
Under Yemi Cardoso’s leadership, the CBN’s 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.
The MPC is expected to meet on September 23 and 24, 2024 to decide on decreasing, retaining or increasing the Monetary Policy Rate (MPR).
Although Nigeria’s headline inflation rate slowed to 33.40% in July 2024, an increase in the inflation rate is expected due to the rise in petrol cost and volatility in foreign exchange market.
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