Central Bank of Nigeria Keeps Policy Rate on Hold at 12%

The Central Bank of Nigeria maintained its monetary policy interest rate at 12.00%.  The Bank also held the cash reserve ratio at 8%.  Bank Governor, Lamido Sanusi, said: "In arriving at its decision, the Committee was faced with a choice between two options. One option was to consider, in view of  the  improving global economic environment, a moderation in headline inflation, slowdown in monetary aggregates and fiscal spending and the crowding out effects of high interest rates, a reduction in the policy rate. This argument was considered but rejected on the basis of a number of factors. These included persistent underlying core inflationary pressures, the need to continue supporting the naira and build up external reserves, the necessity for attracting and retaining foreign investment and the need for consistency and stability in the macroeconomic environment."

Previously the Nigerian central bank also held rates unchanged, and last raised the the monetary policy rate by 275 basis points to 12.00% at its October meeting, after increasing by 50 basis points in September rate 75 basis points in July, and increasing it by 50 basis points at its May meeting this year.  Nigeria reported annual headline inflation of 10.3% in December, compared to 10.5% in October, 9.3% in August, down from 9.4% in July, 10.2% in June, 12.4% in May, 11.3% in April, and 12.8% in March, and just above the Bank's inflation target of 10%.  

The Nigerian government doubled the minimum wage to 18,000 Naira recently.  Nigeria reported annual GDP growth of 7.72% in the June quarter, after growing 7.43% in the March quarter, while the Bank had forecast 2011 growth of 7.8%.  Nigeria's currency, the naira (NGN), has weakened about 2% against the US dollar over the past year, the USDNGN exchange rate last traded around 157.65.

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