29 May 2013

Nigeria Interest Rates Not Coming Down - Governor

Despite controlled inflation rates Africa's biggest oil producer will be more likely to raise than lower its interest rates, according to the central bank governor

Interest rates in Nigeria are more likely to be moved up than down, despite inflation rates remaining below a target 10 percent, according to central bank governor Lamido Sanusi.

"We are very clear that even though inflation is low we are following a tight monetary policy generally," Mr Sanusi tells This is Africa from the sidelines of African Development Bank meetings in Marrakech, Morocco. "If you ask me, I think there is more likelihood of rates going up than going down."

The Central Bank of Nigeria held interest rates at a record 12 percent on May 21, despite inflation falling below double digits for four consecutive months.

"That decision was influenced by a number of factors, including what we saw a relatively higher level of fiscal spending compared to the first quarter of 2012," Mr Sanusi explains.

In early May, Nigeria launched a military offensive against Islamist militants in Nigeria's northeast. That campaign, combined with rising spending as the country approaches elections in 2015, could put pressure on inflation.

Exchange rate pressures are also mounting thanks to output shocks in the oil sector, a consequence of theft in the Niger Delta region. "We see risk to inflation from two sides, the fiscal side and the exchange rate channel - and for this reason we see it as prudent to keep monetary policy tight," Mr Sanusi says.

While the country's finance minister Ngozi Okonjo-Iweala has advocated lower interest rates to spur economic growth, Mr Sanusi says that rates are more likely to go up than down.

"Given where we have been historically and where all nations have been in election years and in times of crisis, I think there is a great likelihood that we will not be easing very soon."

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