January 18, 2012
The Governor of the Central Bank of Nigeria, Mr. Lamido Sanusi, has said that the Monetary Policy Rate may remain unchanged after a general increase in the prices of commodities.
Sanusi, who declared that he was not speaking for the Monetary Policy Committee, said it might be “counterproductive” to raise interest rates in response to the jump in fuel prices that would probably push up inflation in the country.
Bloomberg quoted Sanusi as saying, “We will have to see where the balance of the data points to, but from where I sit, it looks like holding for a bit is the best option.”
The CBN had estimated that inflation in Nigeria would accelerate to 14 per cent or 15 per cent by mid-year, from 10.5 per cent in November, taking into account the initial full removal of fuel subsidy on January 1.
Sanusi added that while the bank was studying the effect of President Goodluck Jonathan’s decision to limit the increase, it was reasonable to keep as close as possible to the current estimates in forming inflationary expectations.
The MPC left the benchmark lending rate unchanged at a record-high 12 per cent when it last met on November 21, 2011.
It increased the rate 2.75 percentage points in October after inflation climbed above the bank’s 10 per cent target.
Meanwhile, following the suspension of the six day nationwide protest against the removal of fuel subsidy on Monday, the naira has fallen against the dollar at the foreign exchange market.
It was gathered that the local currency fell against the greenback as businesses and banks resumed operations on Tuesday.
The naira fell by 0.4 per cent to N162.63 per dollar at the inter-bank market early Tuesday morning in Lagos.
The Nigeria Labour Congress and Trade Union Congress suspended the strike and protests after President Goodluck Jonathan reduced the price of fuel to N97, from N141,
The strike, which shut banks, and paralysed economic activities began on January 9 after the government scrapped subsidies, which it said cost N1.2tn last year.
Bloomberg quoted a strategist at Barclays Plc owned Absa Capital in Johannesburg, Mr. Ridle Markus, as saying, “With the market being closed over the past few days, we do expect demand for foreign exchange to rise sharply as corporate and banking activities resume. Demand at tomorrow’s auction may be much higher than usual, which could put depreciation pressure on the naira against the United States dollar.