The Central Bank of Nigeria (CBN) left the official cash rate unchanged on Tuesday, as the apex bank seeks to support the falling Naira and attack surging inflation while propping up the economy simultaneously.
The Monetary Policy Committee, led by the CBN Governor Godwin Emefiele left the benchmark rate at 14 percent, according to the Governor on Tuesday in Abuja, Nigeria. That was against most analysts call for monetary expansion.
The governor explained that while challenges in the economy remain, that monetary policy alone cannot sustain growth. Lowering interest rates is not advisable and the decision will help limit inflation.
Nigeria’s inflation rose to 17.6 percent in August, it highest in 11 years, following the continuous fall in global oil prices that has erased about 40 percent of Naira’s value against the dollar. The CBN had earlier unpegged the currency on June 20 in an effort to lure foreign investors into the country to offset deficit created by forex scarcity.
Unfortunately, increase in global risks and uncertainties due to the Britons decision to leave the European Union three days later impacted the policy and further plunged the Naira against the dollar.
The economy contracted by 2.06 percent in the second quarter, from -0.36 percent in the first quarter and on track to record its first full-year contraction in 25 years.
