Nigeria’s central bank held its benchmark interest rate unchanged at 13 per cent on Tuesday, stressing the need to preserve foreign exchange reserves that have been depleted in recent months to support a weakening naira.
At the last policy meeting before president-elect Muhammadu Buhari takes office in Africa’s largest oil producer on May 29, central bank governor Godwin Emefiele said it was not possible for the regulator to intervene on a daily basis to supply banks with foreign exchange and support the naira currency.
Government revenues have shrunk sharply on lower oil prices and the naira currency has weakened drastically despite the bank spending billions of U.S. dollars to prop it up.
The cash reserve requirement (CRR), the amount the central bank requires banks to set aside, was revised to 31 per cent for both public and private sector deposits, Emefiele said.
Previously the CRR on private sector deposits was 20 per cent and 75 per cent for public sector deposits.
“The committee stressed the need for practical measures to restore the reserve buffer, safeguard the value of the currency and engender overall stability of the banking system,” Emefiele told a news conference.
“It was noted however, that monetary policy is gradually approaching the limits of tightening.”
Buhari, who won the presidential elections in March, is set to inherit an ailing economy that grew by 3.96 per cent in the first quarter of 2015 – a sharp slowdown from the same period last year.
Last week the national statistics office said Nigeria’s consumer inflation rose to 8.7 per cent year-on-year in April, up 0.2 percentage points from March, marking the highest rate since July 2013.
“With the successful completion of the general election and the progress recorded in the fight against insurgency, the committee noted there is expected to be a reversal in the economic slowdown,” said Emefiele.