Central bank Governor Godwin Emefiele kept the benchmark interest rate unchanged at a record high in his first policy meeting, while promising to lower borrowing costs gradually as price pressures ease.
The rate was held at 12 percent, Emefiele told reporters today in the capital, Abuja, matching the forecasts of all 15 economists surveyed by Bloomberg.
Emefiele, 52, took control of the central bank last month with a mandate to keep inflation, which accelerated to 8.2 percent in June, within the 6 percent to 9 percent target band. While Emefiele has indicated policy makers may begin cutting interest rates, that may be delayed until after February elections to maintain stability in the naira and keep price pressures in check.
“As we begin to see that the macroeconomic levels are moving in the direction that we expect, you’ll begin to see the reversal of interest rates in the direction of going low,” Emefiele said. “We are optimistic of the mandate and the promise that we made to our people to bring down the interest rate.”
The central bank has kept its benchmark rate unchanged since November 2011, while tightening monetary policy by raising the cash reserve requirement on private sector funds this year to 15 percent and 75 percent on public funds.
Inflation risks may emanate from food and “the likely increase in aggregate spending in the run-up to 2015 general elections,” Emefiele said. Policy makers will monitor this trend closely, he said.
Stable Currency
“As the exchange rate and inflation continues to improve we could see an easing in monetary policy after 2015 elections,” Pabina Yinkere, head of research at Vetiva Capital Management Ltd., said by phone from Lagos, the commercial capital. “That is supported by the governor’s stance to achieve inclusive economic growth.”
Emefiele pledged to maintain a stable exchange rate even as it tries to ease borrowing costs.
The naira has weakened 1.3 percent against the dollar on the interbank market this year and was trading at 162.45 as of 3:20 p.m. in Lagos. The bank sells foreign currency at auctions twice a week to maintain the midpoint of the naira peg at 155 per dollar.
“The policy direction of the exchange rate and the interest rate must be seen not only in the context of price and financial stability but also in enhancing the quality of life of Nigerians and promoting employment generation,” Emefiele said.