Nigeria to hold key interest rate

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NigeriaLagos Reuters. An aerial view shows the central business district in Nigeria's commercial capital of Lagos in this file picture.

Abuja - Nigeria’s central bank will probably keep its benchmark interest rate unchanged in the final Monetary Policy Committee meeting before incoming Governor Godwin Emefiele takes office.

All 11 economists surveyed by Bloomberg predicted the committee led by acting Governor Sarah Alade will hold the key lending rate at a record 12 percent to help keep inflation under control.

Alade is scheduled to announce the decision at a press conference in the capital, Abuja, that begins today at about 2 pm local time.

“The interest rate will likely remain the same as macroeconomic conditions remain fairly stable,” Mike Nwanolue, an analyst at Lagos-based Greenwich Trust, said by phone.

“I don’t see the Monetary Policy Committee taking any decision that may unsettle the incoming governor.”

Emefiele, the 52-year-old former chief executive officer of Zenith Bank Plc, will take over at a time when foreign-currency reserves are falling, undermining the central bank’s ability to maintain the midpoint of the currency peg at 155 per dollar.

Inflation accelerated to 7.9 percent in April, staying inside the bank’s 6 percent to 9 percent target band.

“Inflation remains in single digits, so there is no immediate pressure to do anything,” Razia Khan, head of Africa research at Standard Chartered in London, said in an e-mailed response to questions.

“As this is Dr. Alade’s last meeting as acting governor, with a new governor to join in June, we do not expect any big policy changes.”

In March, the bank raised the cash reserve requirements on private sector deposits to 15 percent from 12 percent, citing the continued need for a tight monetary stance.

 

Weaker Currency

 

The MPC meeting is the first since Nigeria recalculated the size of its economy to 80 trillion naira ($492 billion), which put it ahead of South Africa as the continent’s largest.

It also comes a month after bomb attacks in Abuja killed at least 75 people, prompting concern among investors in Africa’s biggest oil producer, and amid an international effort to trace more than 200 girls abducted from their Chibok school April 14.

The naira has dropped 1.4 percent against the dollar this year.

The currency closed 0.1 percent weaker at 162.55 per dollar yesterday, the lowest level since April 9.

Alade took over as a caretaker after President Goodluck Jonathan suspended Governor Lamido Sanusi in February for alleged financial wrongdoing, claims that Sanusi denied.

The unexpected move prompted the currency to drop to a record low as investors worried that the independence of the central bank will be compromised.

That added to speculation by companies such as MTN and United Bank for Africa that policymakers will devalue the currency.

Foreign reserves slumped 15 percent since the beginning of the year to $37.6 billion as of May 15.

In his testimony before lawmakers in March, Emefiele said a devaluation was “not an option.” - Bloomberg News



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