Nigeria's central bank retained its monetary policy rate (MPR) at 12% for a 12th time in a row as expected, saying that the risks of currency instability have eased significantly, while inflation outlook for the next six months is benign.

The central bank’s monetary policy committee (MPC) noted that inflationary pressures continued to moderate in response to the tight monetary policy. Headline inflation declined from 8.7% y/y in July to 8.2% y/y in August and is expected to remain within single digit range over the next six months. The stability of the exchange rate was maintained thanks to the very tight monetary conditions, while the positive outlook is supported by the Fed’s decision to delay the wind down of its monetary stimulus programme and by the improved outlook for financial stability in Europe after the German elections.

The MPC expressed concern about the worsening performance of the oil sector, which is due to growing crude oil theft and significant revenue leakages. The oil sector recorded a 1.15% contraction in Q2 2013, compared to a 0.54% decline in Q1 2013. The MPC urged the government to step up efforts and establish strong controls, independent oversight and transparency in the official oil sector.

The central bank maintained the 50% cash reserve requirement (CRR) on public sector deposits, which was introduced surprisingly in July, and the 12% CRR on private sector deposits.