Nigeria May Cut Interest Rates Before July, Emefiele Says

(Bloomberg) -- Nigeria’s central bank could start cutting interest rates in the first half of the year as inflation eases, Governor Godwin Emefiele said.

Once inflation gets to low double digits “and high single digit happens, then it should be easy for MPC to begin to look at easing,” Emefiele said Wednesday in an interview at his office in Abuja, the capital. “I want to think that between the end of the first and second quarter, we should begin to see easing.”

While inflation slowed to a 20-month low of 15.4 percent in December, it’s still above the authorities’ 6 percent to 9 percent target band. The Monetary Policy Committee didn’t meet as scheduled this week and the central bank’s key rate remained at 14 percent, where it’s been since July 2016. The MPC has been trying to balance bringing down inflation and boosting an economy that contracted in 2016.

Inflation is “treading downwards, but a little bit sticky downwards,” Emefiele said. “We believe that the rate of moderation will improve in the coming months.”

No Quorum

The MPC failed to meet this week is because it lacked a quorum after after the Senate refused to approve President Muhammadu Buhari’s nominees for the panel. That is part of a longstanding battle between the president and his parliament.

Emefiele said the central bank is engaging with the national assembly and he is optimistic that the new members of the MPC, including a deputy governor, will eventually be confirmed. However, the committee would not yet have lowered the monetary policy rate if it did meet this week, he said.

Increases in the price and shipment of oil, Nigeria’s biggest foreign-currency earner, and improved investor confidence mean the central bank can build its reserves to $60 billion in the next 12 to 18 months, from $40 billion currently, Emefiele said.

“Things are looking up,” he said. “No one ever thought the price of crude would hit $70 in such a short period of time.”

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