Nigeria’s central bank kept the benchmark interest rate unchanged at a record high, while signaling it may tighten monetary policy further to control inflation.
The rate was held at 12 percent, Governor Godwin Emefiele told reporters today in the capital, Abuja, matching the forecasts of all 13 economists surveyed by Bloomberg. Half of the 12 members of the Monetary Policy Committee voted to raise commercial banks’ cash reserve ratios, he said.
“The direction for policy in the short to medium term would be either to retain the current tight stance of monetary policy or further tighten,” he said. “The key risks include the possibility of capital reversals as the Federal Reserve’s quantitive easing in the U.S. finally ends in October 2014 amidst dwindling oil output and declining oil prices, domestic security challenges, and upward-trending headline inflation.”
Five MPC members voted to increase the cash reserve ratio on private-sector funds from 15 percent, while one wanted to increase the public-sector rate from 75 percent. The MPC concluded by agreeing to retain both rates.
The naira rose 0.2 percent to 163.29 against the dollar on the interbank market as of 4 p.m. in Lagos, the commercial capital, paring its decline in the past month to 0.7 percent.
Emefiele, 52, took control of the central bank in June with a mandate to keep inflation, which accelerated to 8.5 percent in August, within a 6 percent to 9 percent target band. While he has said he favors lowering borrowing costs, the threat of rising government spending before February elections may give policy makers reason to hold off on rate cuts.
Nigeria, Africa’s biggest oil producer, has since 2009 been battling Islamist insurgent group Boko Haram in the northeast of the country. Violence there is affecting farming, and threatens to drive demand for imported food to fill the void left by domestic production, the governor said.