Central Bank of Nigeria Leaves Rate Unchanged in November

In its 19th of November meeting, the Monetary Policy Committee of the Central Bank of Nigeria decided to leave the benchmark interest rate unchanged at 12 percent. The Committee cited attaining price and exchange rates stability, and warned of possible tightening in 2014.

Excerpt from the statement by the Central Bank of Nigeria:

The Committee recognized the importance of taking into consideration not just the static indices at the point of meeting but overall strategic objectives and targets, as well as the outlook for the domestic economy and the external environment, especially with this being the last meeting for 2013. The Committee noted the decline in inflation and the benign outlook going into the first half of 2014. It further noted the positive impact of monetary policy in engendering a stable exchange rate regime and attracting portfolio investment thus driving the strong recovery of asset prices on the Nigerian Stock Exchange. It also noted that global monetary conditions were likely to remain loose going into Q1 of 2014.

The outlook for 2014, however, portends some potential headwinds that may lead to further tightening in monetary conditions. It is expected that 2014 will be the year for QE- tapering in the US and interest rate rises in Europe, both of which will lead to some pressure on the exchange rate and stock prices due to the impact on capital flows. It is also the year in which election spending is likely to take place domestically, thus bringing more pressure to bear from the fiscal side. As a result, the MPC is of the view that we are not yet at the end of the tightening cycle and may need to tighten further in response to these eventualities next year.

Finally, the Committee formally adopted an inflation target of 6-9 percent in 2014. It also noted that ECOWAS Heads of State have set a 5 percent target at the Convergence Council. The MPC reaffirmed its commitment to moving Nigeria firmly into being a low-inflation environment in the medium term. However, the MPC recognizes the high cost of rapid adjustment and plans to make the transition gradually. 

Central Bank of Nigeria Leaves Rate Unchanged in November

Central Bank of Nigeria | Krisztina Györffy | krisztina@tradingeconomics.com
11/19/2013 4:41:21 PM