Nigerian central bank sees tightening as more likely

CBN Gov, Sanusi

Nigeria's central bank is more likely to tighten than ease policy in the coming year, but it does not currently see a need to move, central bank governor Lamido Sanusi said on Monday.
   Inflation is running at a little over 8 percent currently but should fall back below 8 percent in December, said Sanusi, adding that the bank was keeping an eye on the currency's exchange rate even if it had been relatively stable of late.
   "We are more likely to tighten than ease in the next year," he said of the central bank's monetary policy strategy, speaking at an African conference at the Paris headquarters of the Organisation for Economic Co-operation and Development.
   At its last Monetary Policy Committee meeting in September, the central bank held its main rate at 12 percent for the 12th time in a row, citing a stabilising naira and inflation.
    The bank has come under pressure in the past to cut rates from businesses who say that would stimulate lending. It has resisted, however, arguing that it is only by staying the course despite such pressure that the economy has stabilised.
    Nigeria's central bank expects inflation to remain in a single-digit band through this year and next. It projects 2014 economic growth at 7.6 percent, which compares with a rate this year of around 6.5 percent.
In an interview in March, sanusi has stated same position, saying rate will not change in the near term.
"The benefits we've achieved in terms of a stable exchange rate ... low and stable inflation, increase in the level of reserves, these are benefits that we should not throw away on the altar of some assumed advantage," Sanusi told Reuters on the sidelines of an African finance ministers' conference in Ivory Coast.
   He added that there was little evidence that easing rates marginally would spur lending to businesses anyway.
   "My personal view is that I don't see any change in the next few months," he said, noting however that there were 11 other people with votes on the bank's monetary policy committee.
   Nigerian consumer inflation rose to 9.5 percent in February, from 9 percent in January, but it was within the central bank's single digit target for a second month in a row.
   "If you're at 9 percent and then move up to 9.5 percent, it's about where you want to be, (but) it's not really the time to start easing," he said.
   "You wait until you've seen a sustainable drop in inflation," he said.