First rate-setting meeting after political impasse
* Cenbank governor warns of high food inflation
* Nigeria’s recovery from recession remains fragile (Adds details, quotes, bullet points, graphic)
By Alexis Akwagyiram and Chijioke Ohuocha
ABUJA, April 4 – Nigeria’s central bank kept its main interest rate at 14 percent on Wednesday in an attempt to curb inflation especially in food prices, Governor Godwin Emefiele said.
The economy emerged from its first recession in 25 years in 2017 but growth remains fragile, although higher oil prices and debt sales over the last few months have helped the continent’s biggest crude producer to accrue billions of dollars in foreign reserves.
Emefiele said the nine committee members at the first rate-setting meeting of the year voted unanimously to hold the rate at a record high of 14 percent, where it has been since July 2016 to support the naira and help curb inflation.
“The committee noted that at 14 percent the policy rate was tight enough to rein in current inflationary pressures,” he said.
Most analysts polled by Reuters had expected rates to be kept on hold with cuts seen later this year.
Recent economic data had suggested there was scope for a rate cut. Inflation fell to an almost one-year low in February at 14.33 percent, while the country’s dollar reserves rose to $46.2 billion at the end of March.
But the central bank governor referred to food inflation which hovered around 20 percent in 2017 before falling to 18.92 percent in January and 17.59 percent in February.
“Notwithstanding the general improvement in macroeconomic conditions, the committee noted the general slow pace of moderation of food inflation and also took note of the potential risk from rising global inflation to domestic prices,” he said.
Emefiele also called for the speedy passage of the 2018 budget, which was presented to parliament by President Muhammadu Buhari in November 2017 but is yet to be passed by lawmakers which is necessary before it is signed into law by Buhari.
“Given that the 2018 budget is unlikely to be passed before May and given that implementation of the budget may take even longer, weak money supply growth remains a key concern,” said Razia Khan, chief economist for Africa at Standard Chartered bank, adding that “much hope” had been placed on the budget.
“The longer-term strengthening of Nigeria’s monetary and banking framework would be better served by greater reliance on the monetary policy rate itself as a signal of monetary policy intent,” she said.
The committee’s meeting was the first this year because the central bank cancelled the gathering scheduled January meeting when it was unable to form a quorum after several departures reduced it to just five out of 12 members.
The appointment of new members was delayed by a dispute between parliament and the presidency. The Senate held up some presidential nominations, leaving the MPC unable to form a quorum, but lawmakers approved the appointments in March.
Writing by Alexis Akwagyiram Graphic by Karin Strohecker Editing by Matthew Mpoke Bigg