CBN holding rates will “keep system liquidity tight in defense of the naira – Analyst

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Holding rates will “keep system liquidity tight in defense of the naira,” Lagos-based Investment One Financial Services Ltd. said in an emailed note before the rates decision was announced. 

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While inflation may decelerate on the higher base effect of 2016, “potential for a shift to a liberal foreign-exchange regime and its implication” for prices of gasoline remains a risk to the inflation outlook, it said

The Monetary Policy Committee held the key policy rate at 14 percent, Central Bank of Nigeria Governor Godwin Emefiele told reporters in the capital, Abuja, on Tuesday. That was in line with the forecast of all 17 economists surveyed by Bloomberg.

While inflation in Africa’s most-populous nation slowed for the first time in 16 months to 17.8 percent in February, it still exceeds the target range of 6 percent to 9 percent. Consumer prices surged after the central bank removed a 197-199 peg against the dollar in June, causing the naira to lose more than 40 percent of its value, and as a shortage of foreign currency made the import of everything from gasoline to food more expensive.

The slowdown in inflation in February was partly due to base effects, Emefiele said. Price pressures continue, he said. Nine of 10 MPC members voted to keep borrowing costs unchanged and one favored increasing the rate.

The government said increased production of oil, Nigeria’s biggest export, will help to stabilize the foreign-exchange rate and provide more funds needed to stimulate the economy after it shrank by 1.5 percent last year, the first contraction since 1991. The government aims to boost output to 2.2 million barrels a day this year from an almost three-decade low of 1.6 million barrels a day in the third quarter of 2016 when disgruntled militants blew up several pipelines in the Niger River delta.

S&P Global Ratings spared Nigeria a downgrade and affirmed its B assessment, five levels below investment grade, with a stable outlook on March 17. The rating company said increased oil output and capital expenditure by the government will help the economy expand by an average of 3.4 percent annually through 2020. The government earlier this month released an economic blueprint to boost growth to 7 percent, create 15 million jobs and reduce the inflation rate to less than 10 percent by 2020.

Naija247news
Naija247newshttps://www.naija247news.com/
Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

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