JOHANNESBURG (Reuters) - Nigeria's central bank will wait until November to hike interest rates in Africa's biggest economy, but analysts say it needs to ease the cash reserve ratio on commercial banks first to free up liquidity and kick-start money market trading as soon as possible.
A Reuters poll on Friday showed 17 of 20 analysts predict the Central Bank of Nigeria (CBN) will leave its monetary policy rate unchanged at 13 percent on Tuesday when the committee concludes its two-day meeting.
Of the three who expect a hike next week, two said by 100 basis points while another expects a 200 basis points raise. The poll was taken September 15-18.
The CBN is expected to raise rates by a 100 basis points to 14 percent at the last meeting of the year in November, slightly before economists predict the U.S. Federal Reserve will raise its key federal funds rate after holding it steady on Thursday. [FED/R]
President Muhammadu Buhari's election winning promise to wipe out corruption has not had a good start as he vies for greater oversight and transparency.
He ordered all revenues to be paid into the "Treasury Single Account" from Tuesday. That triggered a liquidity crisis in the interbank market after the measures froze up the flow of cash and stopped trading for the third consecutive day on Thursday.
"It is very likely that the cash reserve ratio will be cut. This addresses the liquidity issues in the Nigerian banking system, especially after the Treasury Single Account was made," said Razia Khan, Africa research head at Standard Chartered.
"However, for as long as Nigeria is adopting a fixed exchange rate regime, and trying to defend its currency, it does not make too much sense to cut the monetary policy rate just yet," she said.
Authorities have implemented unorthodox measures to protect the currency - the bank has blocked access to foreign currency for importing 41 items ranging from soap and toothpicks to cement and private jets.
In an exclusive Reuters interview on Thursday, Governor Godwin Emefiele ruled out a naira devaluation and told people not to panic about the government revenue directive, which risks draining billions of dollars from the system.
However, the Reuters poll also showed that the two best options for Nigeria to improve investor sentiment are to relax capital controls and devalue the currency, based on a smaller sample of responses.
The oil-rich country is excepted to grow below its potential, by just 3.8 percent this year - a downgrade from a survey in July which pegged growth at 4.4 percent. The economy is seen recovering to 5.0 percent growth in 2016.
The growth estimate downgrade is similar to South Africa's economy that is expected to clock 1.9 percent growth this year as China's economic slowdown gains more traction and hurts Africa's two biggest economies.
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