Nigeria to Hold Key Rate at Record 12% to Protect Naira The Central Bank of Nigeria will probably keep its benchmark lending rate unchanged at a record high to bolster the currency, even as inflation eased to its lowest in five years. The Monetary Policy Committee, led by Governor Lamido Sanusi, will hold the policy rate at 12 percent for a 11th consecutive meeting today, according to all 14 economists surveyed by Bloomberg News. Sanusi is scheduled to announce the decision at a televised press conference that begins at 2:30 p.m. in Abuja, the capital. “The risk to the economy is the exchange rate and the depletion of the exchange reserves,” Nema Ramkhelawan-Bhana, an Africa strategist at Rand Merchant Bank in Johannesburg, said in phone interview. While economic growth has weakened, it hasn’t “contracted to the extent that they need to accelerate demand by cutting aggressively,” she said. Sanusi, who won’t renew his contract when it expires in June, targets the currency to keep inflation (NGCPIYOY) under control. The central bank sells foreign exchange at twice-weekly auctions to keep the naira within a range of 3 percent above or below 155 per dollar. The naira has fallen 1.9 percent against the dollar on the interbank market since the last MPC meeting in May and was trading as low as 162.60 yesterday. Foreign-currency reserves declined 2 percent this month to $46.9 billion, according to central bank data. “They’re trying to target more the exchange rate than they are inflation,” Ramkhelawan-Bhana said. Inflation eased to 8.4 percent last month, the lowest level since April 2008, from 9 percent in May. The inflation rate has stayed below the central bank’s 10 percent target this year. Nigeria’s central bank shouldn’t rush to cut interest rates even as inflation is forecast to remain within the target this year, Sanusi, 51, said in an interview in May. The bank’s room to lower borrowing costs depends on government spending, which threatens to increase as the military battles Islamist insurgents in the northeast, he said. Africa’s most populous nation with more than 160 million people relies on oil for as much as 95 percent of export earnings and 80 percent of government revenue. Crude output has been hampered by theft, vandalism of pipelines and shutdowns, resulting in production of 1.83 million barrels a day in June, according to data compiled by Bloomberg. The government had projected output of 2.53 million barrels a day in this year’s budget.
Posted on: Tue, 23 Jul 2013 01:01:50 +0000
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