The Central Bank of Nigeria (CBN) says the majority of Nigerians expect interest rates to rise in the next three months.
CBN announced the projection in its ‘Household Expectations
Surveys, August 2024,’ released on Thursday.
The study was conducted from August 12-16.
Breaking down the respondents’ projections, CBN said
households’ expectations regarding interest rates on bank loans for the next
three months “indicate that 53.8 percent expect the rates to rise, 12.0 percent
believe they will decrease, 15.9 percent anticipate they will remain unchanged,
while the remaining 18.3 percent are unsure”.
“This suggests that
most respondents expect Interest Rates on Bank Loans to increase over the next
three months,” CBN said.
According to the study, 60.8 percent of respondents said
interest rates on bank loans had increased over the past three months, while
53.8 percent expected further hikes.
“When asked about how interest rate on bank loans have
changed over the past 3 months, 60.8 percent felt that interest on bank loan
had risen, 3.2 percent of the respondents thought Interest on bank Loan had
gone down, 17.8 percent thought it had not changed, while 18.1 percent had no
idea,” CBN said.
“The responses show
that more households believe interest rates on bank loans have risen in the
last 3 months.”
The report also highlighted that 75.2 percent of respondents
believe the rapid price increases due to inflation will weaken the Nigerian
economy, showing significant awareness of the negative effects of inflation on
growth.
“75.2 percent of the respondents believed that the economy
would end up weaker, 6.0 percent opined that it would be stronger, while 13.7
percent of the respondents believed it would make no difference,” the apex bank
added.
‘INCREASE IN INTEREST
RATES WILL LEAD TO HIGHER PRICES’
CBN said when asked about the impact of higher interest
rates on prices, 56.8 percent of respondents said they believed prices would
rise in the short term, 16.0 percent disagreed, while 8.2 percent were unsure.
“Similarly, respondents’ understanding of how Interest Rates
might affect price changes in the medium term (six to twelve months) was
evaluated,” CBN said.
“Among the responses, 54.3 percent agreed that a rise in
Interest Rates would lead to higher prices in the medium term, while 17.8
percent disagreed. Additionally, 20.0 percent were neutral, and 7.9 percent
were unsure.
“Respondents were asked whether they prefer Interest Rates
to be increased to control Inflation or kept lower, allowing Inflation to rise.
Of the total responses, 48.5 percent favored lowering interest rate, 38.0
percent preferred raising Interest Rates and 13.5 percent were unsure.
“These results
suggest that a larger proportion of households prefer lower Interest Rates,
even if it means allowing Inflation to increase.”
CBN said households were questioned on whether raising or
lowering interest rates would be more beneficial for the Nigerian economy.
The survey results revealed that 67.4 percent believe the
economy would benefit from lower interest rates, 10.3 percent prefer no change,
11.4 percent think higher interest rates would be better, and 11.0 percent were
unsure.
On July 23, the CBN’s monetary policy committee (MPC) raised
the monetary policy rate (MPR), which benchmarks interest rates, to 26.75
percent — from 26.25 percent.
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