Nigeria - Apex Bank Benchmarks Interest Rate At 12%, As Govt Depletes Excess Crude Account


Nigeria's central bank left its benchmark interest rate on hold at 12 percent on Tuesday as expected but took measures to tighten liquidity to support the weakening local naira currency.
Nigeria's monetary policy committee (MPC) chose to raise banks' cash reserve requirement to 12 percent from 8 percent and reduce net open foreign exchange positions to one percent from three percent to support the naira.
Eleven analysts polled last week had expect the central bank's MPC to keep its benchmark rate unchanged for a fifth meeting running.
The naira has been hit by a fall in the price of oil, Nigeria's main export, and global risk aversion and has weakened by almost 3 percent against the dollar since April. The naira closed at 160.7 against the U.S. dollar on Tuesday, outside the central bank's 150-160 target trading band.
Currency weakness is aggravating inflation as Nigeria imports 80 percent of what it consumes.
Consumer inflation rose to 12.9 percent year-on-year in June, up from 12.7 percent in May. The central bank expects it to peak around 14 percent later this year.
Central Bank Governor Lamido Sanusi said on Tuesday there were serious risks to growth in Africa's second largest economy due to weaker global economic growth, lower oil output, a worsening security environment and high government spending.
Sanusi also said Nigeria was unprepared for a potential oil price slump because government was spending the country's savings, which are stored in the excess crude account.
Nigeria's economy grew 6.17 percent in the first quarter this year, down from 7.68 percent in the fourth quarter last year. The economy is projected to grow at 6.5 percent this year, down from 7.4 percent in 2011.
The central bank has kept rates on hold since November, after six successive hikes last year, including a 275 basis point rise in October to 12 percent, to ward off speculation on the naira. The naira fell 4.5 percent against the dollar last year.

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