LAGOS (Reuters) - Nigeria’s central bank has no immediate plans to cut interest rates and definitely would not consider doing it until after the presidential election in February 2015, the new governor Godwin Emefiele said on Friday.
Emefiele signalled a dovish tone on interest rates on Thursday in his first news conference since taking up the post two days earlier, saying he would seek a gradual reduction in rates, which have been stuck at 12 percent for more than two years. [ID:nL6N0OM2DB]
“That’s an aspirational thing, it’s not a position we are taking right now. We will monitor monetary conditions and let people know,” Emefiele, who replaced suspended former governor Lamido Sanusi, told Reuters in a telephone interview.
The naira suffered selling pressure after Thursday’s news conference - it was at 164.90 to the dollar at 1 p.m. (1200 GMT) on Friday, 1.25 percent down since before Emefiele’s comments - but it later recovered to 162.95 on anticipation of dollar sales by state oil company. [ID:nL6N0ON25O]
Emefiele said his comments had been misinterpreted.
“I said there would be a gradual approach towards reducing interest rates...not that I was planning to start cutting interest rates now,” he said.
Liquidity tightening measures are credited with lowering inflation from 15 percent in 2010 to 7.9 percent currently. Some businesses say lending rates remain punitive and should be reduced to encourage investment.
“This will be fully dependent on monetary conditions and as you know we are under an election cycle,” Emefiele said. “So this definitely won’t be at least until way after the elections.”
In Thursday’s speech Emefiele did say the bank would “maintain a monetary policy stance reflecting liquidity conditions...as well as the potential fiscal expansion in the run-up to the 2015 ... elections”.
But the mere mention of a desire to cut rates down the line sent a strong signal to the markets, analysts said. His predecessor Lamido Sanusi, an anti-graft campaigner, had suggested he had to maintain high interest rates because of reckless government spending, especially during election cycles, when huge state resources go into nourishing patronage networks. While Emefiele’s tone was markedly less confrontational than that, the policy looks effectively the same: no rate cuts until the elections are done and spending gets back under control. Sanusi was often accused by ruling party officials of exceeding his remit when he frequently chastised the government over massive graft. Emefiele hinted in his speech he was unlikely to follow suit, saying his role was “apolitical”.