Nigeria c-bank maintains key rate at 13%, voices concerns about inflation, growth

By bne IntelliNews March 25, 2015

The Monetary Policy Committee (MPC) of Nigeria's central bank retained its monetary policy stance at its latest meeting held on March 24, saying that its previous decisions needed time for their effects to fully permeate the economy. Thus, the monetary policy rate (MPR) was maintained at 13% after a 100bp bike in November, the cash reserve ratio (CRR) on private sector deposits was held at 20%, the CRR on public sector deposits was maintained at 75%, and the liquidity ratio was held at 30%.

The move was widely expected in view of the uncertainty surrounding the upcoming general elections. A rate hike is, however, possible in the second quarter.

The MPC noted that although inflation remains within the central bank’s 6%-9% target, it is concerned from its recent acceleration – from 8% in December to 8.4% in February. The major risks to inflation include elevated aggregate spending in the run-up to the elections, the likely higher import prices given the weakening local naira currency and possible food supply shocks linked to insurgency and insecurity in some major agricultural zones of the country, it said. However, it hopes that its tight monetary policy stance and some recent administrative measures would help lock-in inflation expectations and further stabilize the naira exchange rate.

The MPC also expressed concern about the outlook for growth, which had moderated due to the effects of low oil prices, naira exchange rate depreciation, and election related concerns. The West African country’s full-year GDP growth accelerated to 6.22% last year from 5.49% in 2013, but it is widely expected to slow this year (IMF: 4.8%, World Bank: 5.5%). Moreover, GDP growth decelerated to 5.94% y/y in Q4 from 6.23% in Q3, as a recovery in the oil sector could not offset a slower growth in non-oil GDP. The MPC attributed the softening of non-oil GDP (to 6.44% in Q4 from 7.51% in Q3) to the spillover effects of low oil prices which negatively impacted agricultural output, trade and services. It said it is optimistic that the situation would improve once elections were successfully conducted with the expected improvement in business confidence.

Related Articles

Russia's Rosneft sets foot in Mediterranean with $1.125bn Eni deal

Russia's largest oil producer state-controlled Rosneft has acquired 30% in the largest natural gas field in the Mediterranean from Italian Eni, the company announced on October 9. Rosneft that ... more

PetroSA, Rosgeo sign $400mn oil and gas exploration agreement for South Africa

South Africa's national oil company PetroSA and Rosgeo, the geological exploration company of the Russian Federation, have signed an agreement on a $400mn oil and gas development project in South ... more

South Africa’s MTN to invest $350mn in Iranian broadband

South Africa’s MTN said it has agreed, on a non-binding and preliminary basis, to invest an initial $350mn into Iranian fixed broadband provider Iranian Net. The investment will give ... more

Dismiss