Godwin Emefiele, Governor, Central Bank of Nigeria (CBN) says his promise to cut interest rates would not be implemented immediately, but after the much expected 2015.
Emefiele had on Thursday in Abuja, told a world press conference, the first after he assumed office two days earlier, that Nigeria has one of the highest interest rates, going by a comparison of some emerging market countries- South Africa, Brazil, India, China, Turkey, and Malaysia. Such high rates, he said, "create a perverse incentive for commercial banks to simply buy virtually risk-free government bonds rather than lend to the real sector."
Making clarifications, the new CBN reportedly told Reuters on Friday that there were no immediate plans to cut interest rates and definitely would not consider doing so until after the presidential election in February 2015.
Forex dealers, the report added, said Emefiele's comments were reassuring and had helped to reduce volatility in the market. They also helped the naira to recover some losses triggered after Emefiele had said at his inaugural press conference on Thursday that he would seek to gradually lower interest rates, which markets took as an indication that a rate cut could come soon.
Rates have stayed at 12 percent since late 2011, helping bring down inflation but businesses say they are punitive.
Dealers said the naira should strengthen further on Tuesday on the back of the planned sale of forex by the Nigerian National Petroleum Corporation (NNPC), after it closed at N162.65/$, compared with N162.95/$ on Friday's close.
Traders said many banks sold down their dollar positions in anticipation of dollar inflows from NNPC, which is expected to hit the market by Tuesday.
NNPC, which usually sells dollars to some banks on a monthly basis, accounts for about 70 percent of the volume of dollars traded on the interbank market.
"The market has also calmed since the new central bank governor made the clarification on his plan to gradually reduce interest rates, which was one of the reasons the market was jittery previously," one dealer said.
Emefiele replaced Sanusi Lamido Sanusi, suspended by President Goodluck Jonathan on February 20, but who was on Monday turbaned Emir of Kano, 109 days later.