Nigeria: Central Bank governor Lamido Sanusi cautions against slashing interest rates

Nigeria’s central bank Governor Lamido Sanusi. PHOTO/File

(Bloomberg) – Nigeria’s central bank shouldn’t rush to cut interest rates even as inflation is forecast to remain within its target this year, Governor Lamido Sanusi said.

Rate reductions will depend on whether the government can control spending, Sanusi said in an interview in Marrakech, Morocco, where he is attending the annual meetings of the African Development Bank.

The Central Bank of Nigeria left its policy rate unchanged at a record high of 12 percent on May 21, concerned by the threat of rising spending as the government works to contain al-Qaeda-linked insurgents in the northeast. Inflation has stayed under 10 percent for four consecutive months, meeting the bank’s target.

“The central bank shouldn’t rush into cutting rates and then raising,” Sanusi said. “How much room we have to cut depends on what happens in the fiscal space.”

Finance Minister Ngozi Okonjo-Iweala said last week the economy needs lower interest rates to help spur output.