Nigeria Rate Cut Unlikely Until After Elections, Moghalu Says

Nigeria’s central bank probably won’t cut the benchmark interest rate until after February elections to help control inflation, Deputy Governor Kingsley Moghalu said.

The bank wants to strengthen foreign-exchange reserves before considering lower borrowing costs, Moghalu said in an interview today with Bloomberg TV Africa’s Ijeoma Ndukwe in London.

“I doubt it would happen before the elections in 2015,” Moghalu said. “We’re hoping to be able to build back those buffers and if we’re able to build them back there’s no reason why we cannot begin to bring down the interest rate so long as inflation is under control.”

Governor Godwin Emefiele kept the benchmark interest rate unchanged at a record high of 12 percent in his first policy meeting on July 22. While he has pledged to lower borrowing costs gradually as price pressures ease, risks of higher government spending and foreign outflows before the election may give policy makers room to postpone any rate cuts.

“We still have some inflationary pressure,” Moghalu said. Tight monetary policy “helps to bring inflationary pressures into the single digits, so that purpose has largely been accomplished, though we can’t take our eye off the ball.”

Inflation accelerated for a fourth consecutive month in June to 8.2 percent from 8 percent in May, remaining inside the bank’s target of 6 percent to 9 percent. Gross reserves have slumped 10 percent to $38.8 billion this year, while the nation’s currency weakened 1.1 percent against the dollar in 2014. The naira was unchanged on the interbank market at 162.15 against the greenback as of 5:23 p.m. in Lagos, the commercial capital.

Moghalu said the bank may use measures other than the benchmark interest rate to curb excess liquidity before the elections, without elaborating.

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