Nigeria Holds Key Rate as Economic Growth Remains Sluggish

© Reuters.  Nigeria Holds Key Rate as Economic Growth Remains Sluggish © Reuters. Nigeria Holds Key Rate as Economic Growth Remains Sluggish

(Bloomberg) — Nigeria’s central bank held its benchmark rate for a third straight meeting as economic growth in the West African nation remains sluggish.

All nine members of the Monetary Policy Committee who attended the meeting voted to keep the rate at 13.5%, Governor Godwin Emefiele told reporters Friday in the capital, Abuja.

Key Insights

  • The central bank is caught between inflation that’s been above the target range for more than four years and an economy that’s still struggling to recover from a contraction in 2016. Growth in gross domestic product was lower than forecast and slowed for the second consecutive quarter in the three months through June. With limited scope to ease policy, the central bank has started forcing lenders — through regulations and penalties — to give out more credit in an attempt to stimulate growth.
  • Inflation eased to a 43-month low in August as food costs grew less. However, food-price growth may pick up again after President Muhammadu Buhari closed the border with Benin to halt rice smuggling and ordered the central bank to stop dollar supplies for some food imports.
  • The naira continues to be under pressure and by keeping rates on hold, the central bank would ensure portfolio investment doesn’t slump.

“Projections indicate that real GDP during the third and fourth quarter of 2019 would average 2.11% and 2.34% respectively, driven primarily by non-oil sector,” Emefiele said. “The headwinds to the growth prospects remain high — unemployment, rising public debt and high insecurity across the country.”

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