Nigeria Likely to Raise Benchmark Interest Rate to 8.5% to Curb Inflation

Nigeria’s central bank may raise its benchmark interest rate tomorrow for the fourth time this year to bring borrowing costs above inflation and slow price-growth to below 10 percent, according to a survey of analysts.

Bank Governor Lamido Sanusi will raise the monetary policy rate to 8.5 percent from 8 percent, said London-based analysts Razia Khan at Standard Chartered Plc, Samir Gadio of Standard Bank Plc and Alan Cameron at CSL Stockbrokers Ltd. He is due to announce the decision in a televised press conference at 2.30 p.m. local time.

“The debate is not about whether the MPR keeps rising - we are convinced it will - but how quickly it will rise,” Cameron said in an e-mailed note on July 22. “We are still a long way from positive real interest rates.”

Inflation slowed in June to 10.2 percent from 12.4 percent the month before after the naira strengthened against the dollar, easing import costs. The central bank of Africa’s top oil producer has raised rates as it attempts to slow inflation that peaked at 15.6 percent in February of last year and tries to stem a slide in the local currency. The naira has strengthened 2.7 percent against the dollar since June 1.

“Even though the naira has been firmer in recent weeks, demand for foreign exchange remains elevated and foreign capital is unlikely to really start flowing in until positive real rates are achieved,” Cameron said.

Plans by President Goodluck Jonathan to end fuel subsidies this year may also push prices higher.

Most members of the monetary policy committee “seem to be keenly aware of the impact that fuel price deregulation could have and for this reason are likely to continue voting for hikes,” Cameron said.

To contact the reporter on this story: Dulue Mbachu in Abuja at dmbachu@bloomberg.net.

To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.