No cut in interest rate soon, says Sanusi

THE Central Bank of Nigeria (CBN) yesterday foreclosed the possibility of reducing the prevailing 12 per cent interest rate.

CBN Governor Sanusi Lamido Sanusi said in Paris, France, that the bank was more likely to tighten monetary policy than ease it in the months ahead.

The Monetary Policy Rate (MPR) is the benchmark rate by which the CBN determines interest rate. The Cash Reserve Requirement (CRR) is a portion of banks’ deposit kept by banks with the CBN.

“We’re likely to remain where we are but if we’re going to move at all, we’re more likely to tighten than to ease. I would advise against precipitate easing only to turn around after a few months and tighten,” Bloomberg quoted Sanusi as saying.

At the September 24 Monetary Policy Committee (MPC), meeting the CBN left both its MPR and CRR for banks unchanged at 12 per cent. It also retained the CRR for public sector deposits at 50 per cent. Eleven of the 12 MPC members had voted for no change in the 12 per cent policy rate, while the dissenter, who voted for a 50 basis points reduction, argued that monetary policy should enhance growth and development.

Sanusi said inflation was under control, adding that the naira has held up well relative to other emerging market currencies.

Inflation eased to 8.2 per cent in August from 8.7 per cent in the previous month, staying within the CBN’s target of less than 10 per cent. The naira has weakened by 2.6 per cent against the dollar this year and may come under more pressure as President Goodluck Jonathan estimates a 12 per cent drop in oil and gas revenue next year.

Last month, Sanusi said the CBN was committed to use its currency reserves to support the naira.

However, the reserves have been in decline for some time and stand at $45.3 billion as at October 4. The CBN sells foreign currency at twice-weekly auctions to keep the naira within a range of three percentage points around 160 a dollar. “Inflation should be down to under eight per cent by December,” Sanusi said.

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