CBN wants to see inflation at 9% before mulling rate cut

Nigeria’s central bank governor wants inflation to slow to 9 per cent or less before he considers cutting interest rates, and he doubts that will happen before next year.

“How soon do I see interest rates coming down? I’m not seeing that coming this year,” Godwin Emefiele said in an interview with Bloomberg TV in London on Tuesday. “During the course of 2020 we may be able to see that, but I can’t see that until we begin to see the numbers showing inflation is trending downward.”

The central bank held its monetary policy rate at 13.5 per cent last week for the third straight meeting after surprising the market in March with the first reduction since 2015. While inflation in Africa’s largest oil producer has decelerated from 18.7 per cent in January 2017 to 11 per  cent in August, it’s been above the target band of 6 per cent to 9 per cent for more than four years.

Emefiele and President Muhammadu Buhari are keen to lower interest rates to boost an economy that’s yet to recover fully from a contraction in 2016. Gross domestic product expanded 1.9% year-on-year in the second quarter.

Nigeria’s inflation rate is above the central bank’s 6 per cent to 9 per cent target

“Unfortunately it’s been sticky coming downwards as soon as it hit about 11 per cent,” Emefiele said. “The Monetary Policy Committee would love to see it at about 9 per cent before beginning to aggressively thinking about easing.”

Emefiele also said that a rate cut may trigger capital outflows, which would put pressure on the naira. Both he and Buhari’s administration have signalled that they don’t favour weakening the currency, which has barely budged in the past two years.