The monetary policy rate increased by three quarters of a percentage point to 8.75 percent, Governor Lamido Sanusi told reporters in the capital, Abuja, today. The key borrowing and lending rates climbed by the same amount to 6.75 percent and 10.75 percent respectively.
The government will more than double the minimum wage to 18,000 naira ($118.15) next month, adding to price pressures in Africa’s biggest oil producer. While inflation slowed in June to 10.2 percent from 12.4 percent in the previous month, the core inflation rate, which excludes food, is expected to accelerate in the second half, Sanusi said.
“With core inflation set to rise and the growth outlook still robust, the Central Bank of Nigeria has laid down clearly its price stability credentials,” Razia Khan, head of Africa economic research at Standard Chartered Plc in London, said in an e-mail.
The naira was at 152.35 against the dollar as of 3:33 p.m. in Lagos, compared with 152.25 before Sanusi’s speech. The naira has strengthened 2.7 percent against the dollar since June 1. To ease pressure on prices, the central bank is selling more dollars to keep the naira within a range of 3 percent above or below 150 per dollar at twice-weekly auctions.
Inflation Outlook ‘Uncertain’
“The inflation outlook appears uncertain owing to the expected implementation of the new national minimum wage policy and the imminent deregulation of petroleum products,” Sanusi said. The central bank needed to “proactively address the impact of huge injections of liquidity in the third quarter, to correct the negative interest rate situation in the market and attract foreign capital inflows to build up reserves.”
Driven by higher oil prices and output, external reserves rose to $33.73 billion by July 21, an increase of $1.84 billion, or 5.77 percent, over the level reached on June 30, Sanusi said.
There is “the need for pursuing policies to foster macro- economic stability, economic diversification as well as encouraging foreign capital inflows” given that the current oil price level may not be sustained in the event of a slowdown in global economic recovery, Sanusi said.
Higher interest rates were also required to draw savers back into the banking system from the parallel market, Khan said.
Nigeria’s economy, the third biggest on the continent after South Africa and Egypt, grew 6.6 percent in the first quarter of 2011, from 7.4 percent during the same period last year, Sanusi said. The economy will grow about 7.8 percent this year, driven by the non-oil sector, which expanded 8.65 percent in the first quarter, he said.
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