Nigeria Holds Benchmark Rate, Raises Deposit Rate by 1 Percentage Point
Nigeria’s central bank kept its benchmark interest rate unchanged and raised the deposit rate as it looks to bring inflation below 10 percent.
The monetary policy rate was left at 6.25 percent, Lamido Sanusi, governor of the Central Bank of Nigeria, told reporters today in Abuja, the capital. The borrowing rate was raised one percentage point to 4.25 percent, while the lending rate was kept at 8.25 percent, he said.
“The decision was close,” with policy makers voting six to four for the key rate to be left on hold, Sanusi said. “It could have gone either way.”
Inflation was little changed at 13.4 percent last month, compared with 13.6 percent the month before and the central bank’s target of less than 10 percent. The persistence of high inflation remains a challenge, Sanusi said, while reaffirming the bank’s commitment to price and exchange rate stability.
The tightening of the borrowing rate was justified “given the high inflation and recent pressure on foreign reserves,” Razia Khan, regional head of African research at London-based Standard Chartered Bank, said today in an e-mailed note.
Foreign currency reserves stood at $34.3 billion as of Nov. 15, compared with $34.6 billion at the end of October, Sanusi said. Reserves, which were $58 billion in March 2008, have been used to defend the local currency following an increase in demand for dollars from local rice and fuel importers, he said. Some foreign companies operating in the country also bought foreign exchange to pay debts and dividends, Sanusi said.
‘Need for Tightening’
Members of the monetary policy committee “agreed on the need for tightening, but the discussions centered on the form and the timing of the tightening,” Sanusi said. The key rate was left unchanged “on the need to retain flexibility and allow the effect of the interest rate decision to work through the system,” he said.
The economy of Africa’s largest oil producer and most populous nation will expand about 7.8 percent this year, up from 7 percent last year, Sanusi said.
To contact the reporters on this story: Paul Okolo in Abuja pokolo@bloomberg.net.
To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net.
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