Classical monetary theory relies on a well-known mechanism. When inflation becomes too high, the central bank raises its key interest rates to make credit more expensive, slow demand, and curb price increases. In many developed economies, this tool is the primary lever for stabilization. However, in several African countries, this relationship appears far less automatic.

It all really depends on the source of inflation. If rising prices stem from excessive domestic demand, raising interest rates can have a relatively direct effect. Households borrow less, businesses slow down some investments, and the pressure on prices eventually eases. But when inflation comes primarily from external sources, monetary policy loses some of its effectiveness.

This is often the case in West Africa, where much of the inflation is imported. Economies remain heavily dependent on purchases of wheat, rice, refined fuels, medicines, and industrial equipment. A rise in international prices is quickly passed on to local markets, even if domestic demand remains moderate.

The 2022 crisis provided a very clear illustration of this. The war in Ukraine triggered a sharp rise in global prices for energy, grains, and fertilizers. In several WAEMU countries, inflation accelerated even though overheated domestic demand was not the primary issue. Food prices increased because imports became more expensive, not because households were consuming excessively.

Within the Union, annual inflation exceeded 8% at certain points in 2022, an unusual level for the region. The BCEAO (Central Bank of West African States) then gradually tightened its monetary policy by raising its key interest rates. However, the decline in inflation largely followed the lull in international energy and commodity markets.

Transportation and logistics also play a major role. When maritime freight costs increase or supply chains are disrupted, prices rise even without excessive credit expansion. In 2021 and 2022, global maritime shipping costs increased sharply, directly impacting the prices of imported goods on the continent.

Energy is another example. If fuel prices rise sharply, the effects ripple throughout the economy, from urban transport and food prices to industrial costs. A rise in interest rates does not lower the international price of oil or maritime freight rates.

In some cases, monetary tightening can even complicate matters. If businesses are already struggling to absorb rising production costs, more expensive credit can reduce their capacity to invest or maintain inventories. The economic slowdown then occurs before inflation actually falls.

Nigeria also illustrates this tension. Despite several aggressive rate hikes by the central bank, inflation remained high due to exchange rate pressure, food supply difficulties, and structural imbalances in the foreign exchange market. The problem was not solely related to domestic demand.

This does not mean that central banks are powerless. Raising interest rates can help contain some inflationary expectations, support monetary credibility, and prevent rising prices from spiraling into a sustained increase. But it cannot, on its own, resolve supply shocks, logistical shortages, or deep external dependencies.

Monetary policy therefore remains an important tool, but it is not a universal solution. When inflation stems from the port, oil, or the international wheat market, the answer does not lie solely in the policy rate.