Nigeria leaves benchmark interest rates as gasoline shortages and power failures amid rising imported inflation rattles economy

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Nigeria’s central bank left its benchmark interest rate unchanged as it seeks to boost growth in an economy battling with gasoline shortages and power failures amid rising imported inflation.

Six members of the monetary policy committee who attended the one-day meeting voted to keep the rate at 11.5%, Governor Godwin Emefiele said Monday in a virtual briefing from the capital, Abuja. This matched economists forecasts of a hold in a Bloomberg survey.

Three members wanted a 25 basis point increase, while one voted for a half percentage point hike.

The rate announcement comes a day earlier than was initially scheduled.

“Tightening could adversely impact the fragile recovery of output growth and may stiffen the expected investment expansion,” Emefiele said.

Inflation at 15.7% in February has exceeded the central bank’s 9% target for six years in Africa’s largest economy that is still struggling to recover from two economic contractions since 2016. Gross domestic product expanded 3.4% last year, faster than expected, after contracting 1.92% in 2020, according to the country’s data agency.

Africa’s most populous country faces higher borrowing costs this year after raising $1.25 billion in overseas debt at a yield of 8.375% last week, one of the first sovereigns to tap the Eurobond market since the start of Russia’s war on Ukraine.

The bonds, with a seven-year maturity, were priced higher than 6.125% yields on a similar tenure Eurobond issued late last year.

This is as rising gasoline subsidy costs are expected to pressure the West African nation’s spending plans this year.

The International Monetary Fund forecasts that the country’s funding gap will widen to 6.4% of GDP this year from a pre-pandemic average of 4.3% due to the higher gasoline subsidy bill.