Nigeria Holds Rate at Record High as Price Pressures Mount

(Bloomberg) -- Nigeria’s central bank held its policy rate at a record high as it sees inflationary pressures increasing.

The Monetary Policy Committee kept the benchmark interest rate unchanged at 14 percent, Central Bank Governor Godwin Emefiele told reporters on Tuesday in the capital, Abuja. Seven panel members voted to keep policy unchanged and three favored a 25 basis-point increase, he said.

Nigeria Holds Rate at Record High as Price Pressures Mount

The MPC has held rates at the record high since 2016 to fight inflation that’s been outside authorities’ target band of 6 percent to 9 percent for more than three years and quickened for the first time in 19 months in August. Deputy Governor Joseph Nnanna said last month the panel is “in the mood” for tightening and will raise its key rate if inflation doesn’t slow.

All nine respondents in a Bloomberg survey predicted Tuesday’s decision.

Inflation pressures have started building, Emefiele said. Spending ahead of the February election may quicken price growth, he said.

Policy makers kept a tight monetary stance to also stem the naira from further decline, even as the economy contracted in 2016. Gross domestic product could expand 1.75 percent this year, Emefiele said. That’s below the International Monetary Fund’s forecast of 2.1 percent.

A rate of 14 “percent is still decent for now,” Abiodun Keripe, head of research and strategy at Elixir Investment Partners Ltd., said by phone from Lagos. “The only time I would agree that a 25 basis points increase may come in is if inflation continues to rise, GDP growth begins to expand and capital outflow begins to increase.”

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