The Central Bank of Nigeria's (CBN’s) Governor Godwin Emefiele said the monetary policy committee retained the benchmark rate at 13 per cent. He revealed that the CBN will be working with commercial banks on how to restructure. More details on this will be released at a later date.
Emefiele said the bank's monetary policy committee voted 8-4 in favour of keeping the rate at its current level, one of the world's highest benchmark borrowing rates. Its last move was in November.
The governor during his press briefing said the decision was taken to lead to economic growth and are for the Nigerian people. These are hard times, the governor said, there are limited resources and we need to work to control excesses.
Emefiele also said the naira, which has lost around 15 percent against the dollar over the last year, with an official devaluation in November and a de facto one in February, was "appropriately priced" at its current level of 197.
The bank has curbed interbank access to hard currency over the last few months in a bid to keep the naira on an even keel, although the restrictions have angered investors and frustrated companies that need dollars for imports.
Emefiele rejected the idea of loosening the FX curbs, saying the central bank could not adopt an "indeterminate policy" of currency depreciation.
The weak currency has put pressure on inflation in Africa's most populous nation, which at 9.2 percent is above the upper limit of the central bank's target range.
However, Emefiele said he believed this trend in price rises was transient.
"Pressure on food prices is expected to gradually wane as the planting season gives way to harvest in the month ahead," said the central bank governor.
He also highlighted the impact of fuel shortages after a strike by importers earlier this year which disrupted aviation, banking and mobile phone networks because the private generators that produce most of Nigeria's electricity ran out of gasoline.
Africa's biggest crude producer is almost wholly reliant on imports for the 40 million litres gasoline it consumes per day, due to a neglected refining system.
"Any resolution of fuel scarcity would dampen transportation costs and improve food distribution, while improvements in electricity supply would steady output at lower cost," he said.
Razia Khan, head of Africa research for Standard Chartered bank, said Nigeria was "in a difficult position".
"Growth is slowing, but with inflation set to rise, it is not obvious that policy can be loosened very substantially," she said."
The monetary policy committee also kept the cash reserve requirement on public and private sector deposits unchanged at 31 percent. (Additional reporting by Chijioke Ohuocha in Lagos; Writing by Alexis Akwagyiram; Editing by Ed Cropley and Ralph Boulton)