Nigeria's central bank maintained its policy rate at 12.0 percent, as expected, recognizing "the necessity of sustaining a stable naira exchange rate even as it has to deal with the delicate balancing of the need for a low interest rate regime."
The Central Bank of Nigeria (CBN), which has kept its rate steady since October 2011, said pressure points include underlying pressure from food and core inflation and "the risks that could emanate from the likely increase in aggregate spending in the run up to the 2015 general election" along with the implications of the U.S. Federal Reserve's tapering of quantitative easing on capital inflows and external reserves.
Chairing his first meeting as governor, Godwin Emefiele said the CBN's monetary committee was satisfied with the relative stability in the macroeconomy as reflected in "impressive growth rates, stable consumer prices and exchange rate as well as increased external reserves."
However, he added that the translation of this stability to gains in employment and access to finance by small and medium-sized businesses is weak, noting the potential of the power sector to stimulate output growth and thus employment through enhanced investment if challenges facing the sector are effectively and appropriately addressed.
Nigeria's economy expanded by an annual 6.21 percent in the first quarter of this year, above the same quarter of 2013 but down from 6.77 percent in the fourth quarter, with the non-oil sector the main driver of growth, recording 8.21 percent expansion.
Nigeria's statistics office has rebased Gross Domestic Product with the estimated growth for 2013 at 5.49 percent, up from 5.31 percent in 2011 and 4.21 percent in 2012.
The CBN said there have been underlying inflationary pressures since January, with headline inflation rising to 8.2 percent in June from 8.0 percent in May as food inflation picked up while core inflation rose to 8.1 percent in June from 7.7 percent in May.
It noted that all measures of inflation have seen a progressive upward trend since February and "agreed that this trend should be monitored closely to achieve a reversal."
The CBN targets inflation of 6.0 to 9.0 percent.
Nigeria's gross official reserves rose to US$40.20 billion on July 18 from $37.31 billion end-June.
The naira's exchange rate fell in February when the country's president suspended Lamido Sanusi, the internationally-respected previous central bank governor, but then rebounded in March, helped by the CBN's tightening of the cash reserve requirement on private sector deposits to 15.0 percent.
The naira was quoted at 162.4 to the U.S. dollar today, up from a low of 166.13 on March 2, but down from around 160 at the start of the year.