Nigeria’s economy is at a crossroads, and the Central Bank’s decision to keep hiking interest rates has everyone talking. The goal is to tame inflation, which has been running wild, but the price of this strategy is hitting everyday Nigerians hard.
After looking into the issue, I believe the high-interest-rate policy, while meant to stabilize the economy, is doing more harm than good for the average person and small businesses.
Inflation in Nigeria has been a monster, climbing to levels that make basic goods like food and fuel unaffordable for many. The Central Bank’s response has been to raise interest rates, making it more expensive to borrow money.
The idea is simple: higher rates discourage borrowing, which slows spending and cools down prices. It’s a textbook move to control inflation. But in a country like Nigeria, where millions rely on small businesses and loans to survive, this approach feels like fighting fire with a sledgehammer.
For starters, high interest rates are choking small businesses. These businesses, from market traders to small manufacturers, are the backbone of Nigeria’s economy. Many depend on loans to buy supplies, pay workers, or expand. With interest rates now so high, borrowing costs have skyrocketed.
A shop owner who used to borrow at 15% might now face rates of 25% or more. That means higher loan repayments, less profit, and, for some, the risk of shutting down. When small businesses struggle, jobs disappear, and communities feel the pinch. It’s not just numbers on a page; it’s families going without.
Then there’s the impact on everyday Nigerians. Higher interest rates make loans for things like homes or cars out of reach for most. Even those who already have loans are struggling with bigger monthly payments. Meanwhile, inflation is still high, so the cost of living keeps climbing.
It’s a double blow: people are paying more for loans and more for groceries, with no relief in sight. The Central Bank’s focus on stability seems to ignore the reality that many Nigerians are barely holding on.
Another problem is that high interest rates aren’t even solving inflation as planned. Nigeria’s inflation isn’t just caused by too much spending. It’s driven by supply issues like insecurity in farming areas, high fuel costs, and a weak naira that makes imports expensive. Raising interest rates doesn’t fix these root causes.
Farmers won’t grow more crops because loans are pricier, and importers won’t get cheaper dollars because borrowing is harder. It’s like treating a broken leg with a headache pill; it might help a little, but the real problem stays untouched.
There’s also a risk of slowing the economy too much. When borrowing becomes too expensive, businesses cut back, and consumers stop spending. This can lead to a recession, where growth stalls, and unemployment rises. Nigeria’s economy is already fragile, with millions out of work and industries struggling.
Pushing rates too high could tip things over the edge, making it harder for the country to recover. It’s a gamble that assumes short-term pain will lead to long-term gain, but the pain is hitting now, and the gain feels far off.
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So, what’s a better way? The government needs to tackle inflation’s root causes head-on. For one, improving security in rural areas would help farmers produce more food, lowering prices. Investing in infrastructure like roads and power would cut costs for businesses, making goods cheaper.
Stabilizing the naira through smarter trade policies could also reduce the cost of imports. These steps won’t fix things overnight, but they address the real issues driving inflation, not just the symptoms.
The Central Bank could also explore other tools. Instead of blanket rate hikes, it could offer targeted support to key sectors like agriculture or manufacturing, with lower rates for loans that boost production.
This would keep money flowing where it’s needed most without punishing everyone else. Pairing this with policies to protect low-income earners, like subsidies for essentials, could ease the burden on ordinary Nigerians.
I get why the Central Bank is raising rates. Inflation is a serious threat, and they’re under pressure to act. But the cost of this approach is too high for the average person. Small businesses are folding, families are struggling, and the economy is at risk of stalling.
Nigeria needs a balanced plan that fights inflation without crushing the people it’s meant to help. High interest rates might look like a quick fix, but they’re squeezing the life out of the economy. It’s time to rethink the strategy and focus on solutions that lift everyone up, not just the numbers on a banker’s chart.
