New-Look Nigeria MPC Holds Rate at Record at First 2018 Meeting

LAGOS (Capital Markets in Africa) – Nigeria’s newly constituted Monetary Policy Committee held the nation’s main lending rate at its first meeting this year to continue fighting inflation that’s above target.

The committee that admitted five members last month unanimously decided to leave the benchmark interest rate at 14 percent, central bank Governor Godwin Emefiele announced at a press conference in the capital, Abuja on Wednesday. That was in line with predictions of all but two of 11 economists in a Bloomberg survey.

The MPC failed to convene as scheduled in January and postponed its March meeting because it lacked quorum after five members retired last year and lawmakers initially refused to screen President Muhammadu Buhari’s replacement nominees because of political differences. They finally approved five of six candidates for appointment, including two new central bank deputy governors on March 22.

Inflation in Africa’s most-populous nation decelerated for a 13th consecutive month in February to 14.3 percent, but remained above the regulator’s target of 6 percent to 9 percent. Policy makers have kept the main rate at a record high since July 2016 to reign in price growth and stem further naira declines, even as it tries to support an economy that contracted in 2016.

“The need to curb the high inflation rate and maintain stability in the foreign-exchange market were the main reasons for contractionary monetary policy,” FSDH Merchant Bank said in an emailed note before the decision. But the economic recovery is “still very fragile” and requires policy easing to stimulate growth, it said.

The International Monetary Fund forecast Nigeria’s economy will expand 2.1 percent this year from less than 1 percent in 2017 as oil production remains stable and supply of foreign currency needed to import factory inputs improves. To support growth, lawmakers are set to vote on increasing this year’s budget by 16 percent to 8.6 trillion naira ($24 billion), about 30 percent of which is for investment in roads, rail, ports and power.