Nigeria central bank holds policy rate at 12 pct again

Nigeria's central bank held its interest rate at 12 percent for a twelfth time in a row on Tuesday, citing what it said were successes at stabilising inflation and the naira, but noting that high government spending meant there were dangers ahead.

CBN Gov, Sanusi

   The bank has come under pressure in the past to cut rates, from businesses who argue it would stimulate lending. It has repeatedly resisted it, arguing that it is only by staying the course despite such pressure that it has stabilised the economy.
   Central Bank Governor Lamido Sanusi said the Monetary Policy Committee (MPC) had voted 11-1 in favour of holding rates where they were. He said the MPC had noted "with satisfaction the stability in the financial system and currency markets."
   He attributed this in large measure to a shock tightening in the previous MPC meeting -- when the bank slapped a 50 percent cash reserve requirement on public sector deposits, up from 12 percent before, in a bid to support the naira.
   "The naira exchange rate remains stable at the foreign exchange markets," he said, adding that this had been "underscored by the policy of intervention to improve supply conditions and the very tight monetary conditions maintained since the last MPC meeting".
   But he raised concerns about continued high government spending and a surge in demand for dollars from the political classes. Elections are expected in 2015 and politicians often spend massively on patronage to try to secure seats.
   "In consideration of all these issues ... the committee decided to hold the MPR at 12 percent," Sanusi said.