May 22 (Lagos) - The Monetary Policy Committee of the Central Bank of Nigeria kept its key benchmark lending rate also known as the Monetary Policy Rate (MPR) on hold at 12 % today for the fourth time in a row, citing the need to balance inflationary concerns with slowing growth.
Central bank governor Lamido Sanusi said the bank was concerned about a slowdown in global economic activity and lower crude oil prices and domestic oil output, which meant Nigeria was facing a potentially sustained decline in its surging growth rates.
CBN also kept its +/- 200 basis point corridor around the base rate.
Relatively benign inflation and slow credit growth meant there was no further need for monetary tightening, Sanusi said, whilst noting that loosening would have little impact on GDP growth in current conditions.
Nigeria's economy is expected to expand at a slower rate of 6.5 % this year, down from 7.4 % in 2011, due to disruptions to oil production and ongoing weakness in developed countries that buy crude from Africa's largest producer, data showed this month.
"This confirms a disturbing and uninterrupted trend of decline going back to Q1 2010," he said. "Crude oil production was estimated to have declined by 2.32 percent in quarter one 2012 ... Non oil GDP growth was (also) much lower ..."
Sanusi noted "the very dark clouds gathering over global economic recovery in 2012," and said this would surely further impact Nigeria's oil-dependent domestic growth.
Nigeria's inflation rate rose to 12.9 % in April, year on year, driven largely by non-food items and a very price stable comparative month in April last year.
Though Nigeria's economy has been one of the fastest growing in the world and bond yields are attractive, poor fiscal management has had a tendency to cause inflationary pressures.
Sanusi noted that the main cause for a fall in GDP growth was lower agricultural output.
"Interest rate movements would not be effective in stimulating growth under such circumstances," he said, but he added:
"At this point in time the trajectory of prices is more dependent on fiscal than ... monetary policy ... Sluggish growth in credit, a stable exchange rate ... and benign month on month inflation do not suggest a need for further tightening at this point."
reporting for easykobo.com on Tuesday, May 22 2012 from Lagos, Nigeria
Source - various