Nigeria’s Central Bank left its benchmark interest rate unchanged at 13 percent as expected on Tuesday, saying tight monetary policy should offset the inflationary effects of elevated spending ahead of a March 28 election.
Governor Godwin Emefiele said the Monetary Policy Committee was also satisfied with the bank’s attempts to stabilise the naira, which has come under major pressure in the last six months due to the collapse in oil prices.
The currency has dropped from around 165 to the dollar a year ago to 198 this week, but spiked as low as 206 in the interbank market last month and is trading weaker than 220 in the black markets on the streets of Lagos and Abuja.
The weakness of the currency in Africa’s top economy has fuelled the illegal use of dollars in day-to-day domestic transactions, such as paying rent or school fees, Emefiele said, adding that action would be taken against transgressors.
“The CBN will very soon in due course come after them,” he told a news conference.
Emefiele said he was worried about the outlook for economic growth, but added that investment and business confidence should pick up once Africa’s most populous nation had navigated this weekend’s election.
“I’m optimistic that after the elections, confidence will improve, businesses will resume,” he said. “I’m confident the economy will be resilient.”
Economist polled by Reuters had expected the benchmark rate to stay at 13 percent, although the poll did forecast that it would rise 100 basis points in the second quarter.