The Central Bank of Nigeria (CBN), which has maintained its policy rate since October 2011 but in January again raised the CRR on public sector deposits, said the Monetary Policy Committee had taken note of the relative stability of the exchange rate of the naira "in the face of undue pressure" and taken its policy decision with a view to attaining price and exchange rate stability, the goal of transitioning to a low inflation environment and the need to retain portfolio flows.
"The Committee unanimously voted for further tightening of monetary policy but were divided on the instruments,"with some members voting to raise the MPR to attract further capital inflows while other members felt that such an increase could impact access to credit and negatively affect growth.
The CBN's committee voted by 5 to 4 to maintain the MPR and raise the CRR on private deposits. Nigeria's naira was hit by last month's suspension of Lamido Sanusi, the outspoken governor of the central bank by Nigeria's president. Sanusi has often criticized the government of corruption and has called for an investigation into billions of dollars in missing oil revenue.
The naira has depreciated by 3.2 percent against the U.S. dollar this year, trading at 165.2 today.
Nigeria's gross reserves declined to US$ 37.83 billion this month from $42.85 billion end-December, with the central bank attributing the decrease to the need to fund the foreign exchange market "in the face of intense pressure on the naira and the need to maintain stability."
Tight monetary policy is needed to consolidate recent gains in inflation, the central bank said, with the recent resurgence in core inflation reinforcing this view.
"Thus, prudent monetary stance would also facilitate better reserve and exchange rate management in an environment where Fed tapering increases pressure on emerging economies financial markets," the bank said.
Nigeria's headline inflation rate eased to 7.7 percent in February from 8.0 percent in January due to a moderation in food prices. But core inflation rose to 7.2 percent from January's 6.6 percent. The central bank targets inflation of 6.0 to 9.0 percent
Nigeria's economy remains robust, the bank said, with Gross Domestic Product growing by an estimated 6.89 percent in 2013, up from 6.58 percent in 2012, with the non-oil sector the main driver of growth in the fourth quarter.
The central bank projects 7.7 percent growth for fiscal 2014, with the relatively robust projection based on favorable conditions for increased agriculture, sustained outcome of banking sector reforms and government initiatives to stimulate the real economy.