The Central bank of Nigeria (CBN) said on Thursday it expects inflation to remain below its single-digit target throughout 2014, and a Gross Domestic product growth rate of 7.6 percent, compared with proection of 6.5 percent growth this year.
CBN Deputy Governor, Kingsley Moghalu said Nigeria's fiscal deficit should stay below 3 percent of Gross Domestic Product in 2014.
| Lamido Sanusi |
"Fiscal prudence ... on the part of the government has yielded salutary results as fiscal deficit has remained below 3 percent ... We don't expect this to change in 2014," he said.
High growth rates and a consumer population approaching 170 million remain a draw for investors in Africa's second biggest economy, but they are wary of risks such as the government's tendency to mismanage its finances, despite a huge oil windfall.
The bank has embarked on aggressive monetary tightening over the past two months to support the naira keep price rises down.
It held its policy interest rate at 12 percent for the eleventh time in a row at the last Monetary Policy Committee (MPC) meeting in July. It also slapped a 50 percent cash reserve requirement on public sector deposits, from 12 percent before.
That has sucked more than a trillion naira ($6.17 billion)out of the financial system, which traders said has forced up overnight lending rates -- they reached a record high of 44 percent on Tuesday.
The bank has come under pressure from businesses to slash interest rates and free up lending -- a major constraint on growth -- but Sanusi has resisted, arguing that the government still spends money recklessly, threatening inflation.
It was not clear whether Thursday's remarks on fiscal prudence marked a softening of the bank's stance. Some analysts expected rate cuts this year, but they have yet to materialise.
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