September 19, 2011
Nigeria's central bank monetary policy committee on Monday raised its benchmark interest rate for the fifth time this year to 9.25 percent , up from 8.75 percent and at the top end of expectations.
Central Bank Governor, Lamido Sanusi, said the decision to further tighten monetary policy was to tackle future upward inflationary pressures, including high government spending and borrowing, the implementation of a new minimum wage and the likely removal of fuel subsidies.
He said the decision was also influenced by the need to support the local naira currency.
"Concerns remain about sustaining the current inflation trend. The anticipated high liquidity in the near future would have a bearing on inflation in the near future," Sanusi told reporters, reading from the MPC communique in Abuja.
"The fiscal stance continues to be expansionary. In addition there is the weight of structural factors such as the announced hikes in electricity tariffs and the expected removal of the petroleum subsidy."
Analysts had been divided on the likely outcome prior to the meeting. Seven of the 13 analysts polled by Reuters expected rates to rise by 25-50 basis points, with the rest predicting rates would be unchanged.
Nigeria's inflation remained steady within the central bank's notional single-digit target in August, data showed this week.
Headline inflation was 9.3 percent year-on-year in August from 9.4 percent in July, while growth in food prices , the largest contributor to the consumer inflation figure, rose to 8.7 percent in August from 7.9 percent in July.
But core inflation, which excludes some volatile components such as food and energy, remained in double digits in August.