Monetary Policy: CBN May Retain 12% Interest Rate

emefiele

Nigeria’s central bank is likely to leave monetary policy unchanged when it meets today (Friday), but will be more accommodative next year if the naira can hold firm ahead of an expected U.S. interest rate rise, economy analysts have predicted .

Some of Nigeria’s emerging market peers such as South Africa have already raised interest rates to boost demand for their currencies and halt rising inflation as the dollar has gained on the back of an improving U.S. economy.
However, all 23 economists surveyed this week expect the central bank of Africa’s biggest economy to keep its main interest rate at 12 percent at a policy meeting on Friday, despite inflation quickening for the sixth consecutive month in August.

Nigeria’s inflation rate is now just under the 9 percent upper end of the central bank’s comfort range, with former central bank governor Lamido Sanusi credited with keeping it in check.
New central bank governor Godwin Emefiele said just after taking office in June that he would seek to gradually lower interest rates – which have held at 12 percent for nearly three years – indicating a new dovish stance.

However, the governor toned down his initial comments, saying the bank (CBN) had no immediate plans to cut rates and that it would consider it after elections next February.
Economists still see lower rates as premature but also do not expect rates to go higher.
“There is probably very limited appetite on the part of the monetary policy committee to raise interest rates further right now,” said Razia Khan, head of Africa research at Standard Chartered.

Author: News Editor

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