CBN: Most Nigerians expect interest rates to rise in next three months

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.