Nigeria Keeps Interest Rate on Hold at 13%
Nigeria’s central bank left the monetary policy rate unchanged at 13 percent at its January 20th meeting, and remained defiant against the pressure to devalue the currency.
1/20/2015 6:34:49 PM
The liquidity ratio was left unchanged at 30 percent; the cash reserve requirements on public deposit remained at 75 percent and the private sector funds at 20 percent.
Nigeria is Africa’s largest oil producer and the revenues from oil exports account for more than 70 percent of the government budget. Since June, oil prices dropped more than 50 percent, putting the pressure on the currency. Since the beginning of November, the naira lost more than 12 percent to the USD and on January 20th, it touched a record low 189.55 naira per dollar, above the bank's target band of 168 to the dollar.
So far, the central bank has made several attempts to defend the currency. At its previous meeting on November 25th, policymakers raised the benchmark interest rate by 100 bps to 13 percent for the first time in three years and widened the currency band by 200 bps to 5 percent. In addition, on December 19th, the bank has imposed limits on currency trading by barring dealers from depositing their currency-trading funds overnight, preventing them from after-hours trading and placing bets for or against a single currency at the close of a trading session.