Bank of Nigeria defies calls to devalue Naira as it keeps Key Rate at 13%

The Bank of Nigeria’s Monetary Policy Committee has held the key rate at 13 percent, Governor Godwin Emefiele told reporters on Tuesday in the capital Abuja.

That was in line with the forecasts of 28 of 30 economists surveyed by Bloomberg, while two predicted a cut. The cash-reserve ratio was reduced to 25 percent from 31 percent.

A global slump in crude oil prices by more than half in the past year has put pressure on the currency of Africa’s largest economy, forcing the central bank to twice devalue the Naira since November 2014.

Emefiele, turned to foreign-exchange controls this year to stabilize the currency, resisting pressure from investors and even fellow Monetary Policy Committee members who say the Naira remains overvalued.

Emefiele’s opposition to a devaluation is backed by President Muhammadu Buhari.

Emefiele said the foreign-exchange trading restrictions will help create jobs and boost Nigerian industries and the Bank of Nigeria is optimistic that demand for hard currency will eventually come down.

The Naira has stabilized to trade at an average of 198.90 against the US Dollar on the interbank market since March after weakening almost 10 percent in the first two months of the year.

Policy makers kept interest rates unchanged even as inflation accelerated to 9.3 percent in August, exceeding the Bank of Nigeria’s 6 percent to 9 percent target band for a third month.

The economy may fall into recession next year if “proactive steps” are not taken to support key industries, Emefiele said. The economy grew at the slowest pace in at least five years in the second quarter, expanding 2.4 percent from a year ago.

Emefiele’s signaling of a recession “suggests to me that they are slowly gearing themselves up for a U-turn on the position that they have taken to date,” Manji Cheto, vice president of Teneo Intelligence in London, said by phone. “That’s a clear indication that the growth story has got to be a big focus going forward.”

Source: Bloomberg