Nigeria Holds Rate at Record High as Inflation Persists
(Bloomberg) -- Nigeria’s central bank held its key interest rate at a record high level as it sees inflationary pressures persisting even as prices are becoming more stable, it said.
The Monetary Policy Committee maintained the benchmark rate at 14 percent, Governor Godwin Emefiele told reporters Thursday in the capital, Abuja. The median estimate in a Bloomberg survey was for the rate to be held at that level.
- All 11 MPC members present voted to hold. That compares with three of 10 members who voted for a 25 basis-point increase at a previous meeting in September.
- The central bank has kept the rate at 14 percent for more than two years to curb inflation, which has persisted above authorities’ target band of 6 and 9 percent.
- “A hold position is an expression of confidence in the policy regime given the gradual improvement in both output growth and price stability,” Emefiele said Thursday. “On this premise, the downward risk to growth and upside risk to inflation appear contained.”
- Nigeria’s inflation rate declined for the first time in three months in October even as food-price growth accelerated. The consumer-price index rose 11.26 percent from a year earlier compared with 11.28 percent in September, the Abuja-based National Bureau of Statistics said Wednesday.
- Even while keeping the base rate steady, the CBN has reined in liquidity via short-term bills known as open market operations, or OMOs, to protect the naira and save reserves, which are down 13 percent in the past six months.
- The CBN “wants to do more indirect tightening,” Kunle Ezun, an analyst at Ecobank Nigeria Ltd in Lagos, said by phone. “They are using the OMOs as we move into the election time.”
- Nigeria will hold general elections in February with President Muhammadu Buhari seeking a second mandate
What Our Economists Say ...
|“The decision is surprising given that the drop in the oil price should add pressures on the naira’s peg to the dollar. Moreover, the increase in the minimum wage represents the kind of election-related spending that could add demand-side pressures to inflation that the CBN has been very vocal about this year.” |
-- Mark Bohlund, Bloomberg Economics
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