Nigeria’s central bank on Tuesday kept its key interest rate on hold, betting recently-imposed capital controls will be enough to arrest the damage tumbling oil prices have brought to Africa’s largest economy.
Central Bank of Nigeria Governor Godwin Emefiele said the key interest rate would remain at 13%, its level since a 100-basis point increase in November.
Aside from the recent rate increase, the bank has tested less conventional measures to stem the local currency’s slide. In November the bank curtailed U.S. dollar sales and bought naira to stoke demand. But defending the naira’s peg against the dollar has been costly. The bank’s foreign currency holdings have fallen to $34.5 billion from nearly $40 billion in July.
The bank also lowered its target trading band for the naira in November — a sign that the central bank wasn’t able to defend Nigeria’s currency at stronger levels.
When those measures and the rate increase didn’t check the naira’s decline, the bank moved to curb currency speculation. It barred currency traders in December from after-hours trading and placing bets at the close of a trading session.
Mr. Emefiele on Tuesday defended the extraordinary measures the bank is using to try to stem the naira’s slide. “We will continue to provide liquidity for legitimate transactions, and people should stop speculative attack[s] on the Nigerian currency,” he told reporters in Nigeria’s capital.
Mr. Emefiele, Nigeria’s top banker since June, is seen as an ally of President Goodluck Jonathan.