Nigeria must maintain border closures with focus of boosting local economic output, Godwin Emiefele has said after the Nigerian central bank left its benchmark lending rate on hold at 13.5% on Tuesday, after a government decision to close borders with neighbouring countries sent inflation to a 17-month high last month.
Central bank Governor Godwin Emefiele told a news conference in the capital Abuja that the decision by the bank’s monetary policy committee (MPC) was unanimous.
He said the impact of the border closures on prices was “reactionary and temporary” and that the medium-term benefits of the government’s decision outweighed the short-term costs.
Emefiele said he would advise the government to maintain the closures in the interests of boosting economic output, which has been recovering relatively slowly in the non-oil sector.
“In view of the uptick in inflationary pressures, (the MPC) decided that the balance of risks was in favour of protecting price stability,” Emefiele said, after data last week showed inflation hit 11.6% in October.
Emefiele said a central bank decision to set a minimum loan-to-deposit ratio for lenders had helped lift economic growth to almost 2.3% in the third quarter, adding that the policy must be sustained as it had led to a drop in interest rates.
Some banks have been caught out by the initiative, incurring penalties from the central bank.
The majority of economists polled by Reuters last week predicted that the MPC would keep the lending rate on hold in Africa’s largest economy and top crude oil producer
The central bank has been trying to boost growth by encouraging commercial banks to lend, but it has also kept interest rates high and liquidity tight to support the currency.
The bank forecasts economic growth of 2.2% this year, while the International Monetary Fund expects growth of around 2.3%.