Nigerian Central Bank Leaves Benchmark Rate Unchanged, Denies New FX Policy

Nigeria’s central bank held its benchmark lending rate at 11.5% on Tuesday, said Governor Godwin Emefiele, who also denied that the country is adopting a new foreign exchange management policy.

The rate decision would allow the bank “to deploy liquidity into employment generation and output-stimulating sectors of the economy,” Emefiele said, speaking at a briefing to announce the decision.

“This would help consolidate the country’s recovery process,” he said.

The bank cut rates twice last year to try to stimulate an economy that has been hobbled by the COVID-19 pandemic and an oil price crash.

A third of Nigeria’s workforce are now out of work and the economy expanded just 0.11% in the fourth quarter. Lower oil receipts have weakened its currency, the naira, and inflation climbed to a four-year peak in February as food prices jumped more than 20%.

Few analysts expected the central bank to either raise or lower the 11.5% base rate, given Nigeria’s low growth and high inflation.

NO NEW FX POLICY

The governor also addressed reports Nigeria is unifying its foreign exchange rates, which the International Monetary Fund and World Trade Organization have for years said should be liberalised.

Nigeria has not changed its foreign exchange management policies, Emefiele said.

At another event Tuesday Vice President Yemi Osinbajo said payments made as part of Nigeria’s federal allocation will use the Nafex foreign exchange rate, when asked about reported plans for a unified flexible exchange rate rather than a pegged one. Nafex is a spot market rate quoted by investors and for imports.

“The federal allocation account is the account where funds go, funds that are shared between the federal and the state governments,” he said

“In the past week, the past two weeks, we’ve seen some momentum (from the central bank) towards greater unity of the exchange rates.”

– Reuters