Nigeria acts to counter likely inflationary surge

The Central Bank of Nigeria has raised rates and its cash requirement ratio on concerns that inflation could soar in the coming months.
The Central Bank of Nigeria has raised rates and its cash requirement ratio on concerns that inflation could soar in the coming months.

The central bank pushed its benchmark monetary policy rate up by a quarter point to 10.25% and the cash requirement ratio a full basis point to 4%, fearful that imported inflation, fiscal expansion and rampant private-sector borrowing could lead to a sharp acceleration in price growth.

Annual inflation rose from 7.8% in March to 8.2% in April, largely on the back of a 13.1% rise in food prices. The M2 measure of money supply shot up 62.2% in the year to March and the amount of private-sector credit by 96.5% over the same period.

"In view of the sharp growth of credit to the private sector and of M2, and as fiscal expansion is at an all-time high, threats to the resurgence of inflation are very high," Charles Soludo, the governor of the central bank, said on Monday. "In addition, there is the threat of imported inflation owing to global rises in prices.

The economic outlook was, Soludo said, "strewn with many uncertainties." Along with the threat of imported inflation and fiscal expansion, international financial market conditions also posed a "severe challenge" to the central bank's rate-setting board.

Click here to read the central bank's statement

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