Nigeria’s central bank keeps the benchmark interest rate at 11 percent, while keeping the naira at its current exchange rate peg. As David Pollard reports, the bank has resisted calls to devalue the currency.
Tough choices for Nigeria’s central bank
On hold for now – Nigeria leaves rates at 11 per cent – and the naira exchange rate at its current peg.
(SOUNDBITE) (English) NIGERIA’S CENTRAL BANK GOVERNOR, GODWIN EMEFIELE, SAYING:
“The committee in consideration of the headwinds in the domestic economy and the uncertainties in the global environment, decided a unanimous vote to retain monetary policy.”
It’s a tough set of choices for central bank chief, Godwin Emefiele.
Inflation is at nearly 10 per cent – oil revenues have been plummeting.
And a weakening currency means prices of imports – on which Nigeria depends – are rising steadily.
Official restrictions on the amount of dollars businesses can buy for import purchases make that worse.
But if the bank devalues the currency – it’s faced calls to do that from investors and the IMF – inflation could get even higher.
Though foreign investors see little option if Nigeria is to attract vital foreign funds.
And shore up a widening budget deficit.
Rabobank strategist Jane Foley.
SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING:
“If we look at the Nigerian economics right now, we have this situation where there is pressure on them to drop the peg. They are standing by it right now. But the longer oil prices remain low, the greater the chance we will see a devaluation.”
In the meantime, Nigeria’s parallel currency market appears to be making its own choices.
The naira diving amid a sharp round of selling since last month.