The MPC met yesterday to decide on the monetary policy stance of Nigeria. With a sense of candour and humour, they hiked the monetary policy rate by 100 basis points to 17.5% p.a. The committee was divided on the extent of tightening but was generally hawkish.

It is unusual for interest rates to be altered 30 days before a general election in most countries. But these are interesting and unusual times in Nigeria. The major problem is that whilst the policy rate—a signaling rate to anchor investor expectations—is increasing, effective treasury bill rates have declined by over 1000 basis points. This is a major contradiction of direction and expectations.