By Ruth Olurounbi and Elisha Bala-Gbogbo
MPC raises cash reserve requirement for banks to 27.5%
Increased inflation could start weighing on growth: governor
General Economy As Nigeria Faces Rising Debt In 2020
Nigeria’s central bank held its benchmark rate for a fifth straight meeting as inflation pressures persist in Africa’s top oil producer.
All 11 members who attended the meeting of the monetary policy committee voted to keep the rate at 13.5%, Governor Godwin Emefiele told reporters Friday in the capital, Abuja. The panel raised the cash reserve requirement for lenders to 27.5% of total deposits, from 22.5%, to curtail excess liquidity in the banking sector after nine members voted for that, he said.
Nigerian’s MPC held its key rate with inflation that’s at a 20-month high
Inflation quickened to a 20-month high in December and has now been above the central bank’s target band of 6% to 9% for more than four years. Food price-growth is one of the key drivers, partly because costs are pushed up by shortages caused by a closure of Nigeria’s land borders that started in August.
Emefiele said the recent uptick in inflation was due to structural and supply-side factors, expansionary fiscal policy and growth in money supply. It’s a concern and getting to a level where economic growth is “retardant,” he said.
The central bank’s task of managing inflation is being complicated by an economy that’s still struggling to recover meaningfully from a contraction in 2016. The International Monetary Fund projects gross domestic product will expand 2.5% this year and Emefiele said the MPC sees growth at 2.35%.
Finance Minister Zainab Ahmed said this week at the World Economic Forum in Davos the goal was to reduce inflation to below 10% this year, but due to an increase in the value-added tax rate and the minimum wage this will probably only be achieved in 2021.
— With assistance by Gordon Bell