A Week in Nigeria: 30 March

In this week’s round-up: the central bank announces a surprise interest rate cut, MTN returns to court and finance minister discusses borrowing plans.

The decision to cut Nigeria’s main interest rate, which remained unchanged for more than two years, was announced by Central Bank Governor Godwin Emefiele
  • Nigeria’s central bank cut its benchmark interest rate to 13.5 percent from 14 percent in a surprise move that the governor, Godwin Emefiele, said was an attempt to stimulate growth in Africa’s biggest economy and signal a “new direction”. It is the first rate cut since November 2015. The rate had been held at 14 percent since July 2016 to support the naira and curb inflation. “The committee felt that given the relative stability in key macroeconomic variables there is a need to signal a new direction, in which case we are talking about being pro-growth,” said Emefiele. Six of the monetary policy committee’s 11 members who met agreed on the 50 basis point rate cut. There was widespread surprise at the cut. Most analysts polled by Reuters in January expected rates to be kept on hold through to the middle of the year at least. Doubts were also raised about the impact it would have. If you’re hungry for more details and have time to spare, watch the full announcement.

But the naira was forecast to soften against the dollar in the week to next Thursday, according to the Reuters FX Week Ahead. The naira traded at 360.50 per dollar on the over-the-counter market for investors on Thursday. “The currency might weaken slightly. An NDF matured yesterday and people want to exit. With that, demand has increased, especially as people don’t want to roll over,” a trader told Reuters on Thursday.

  • It’s worth noting that the central bank governor’s announcement followed the first meeting of the monetary policy committee since President Muhammadu Buhari secured a second four-year term in February. Emefiele’s term as governor is due to end in June. Nigerian central bank governors typically serve one term but may serve a second with some suggesting that the governor is keen to stay on.
  • The interest rate cut wasn’t the only story this week. “We intend to fund the 2019 budget through borrowing locally and internationally with a spread of 50:50. Our focus is on concessionary long-term loans,” Finance Minister Zainab Ahmed told the National Assembly during a budget hearing. We reported on what she told parliament. Ahmed said there were challenges generating revenue but that the 2018 budget has performed well. She said the government had put in place strategies on how to finance the 2019 budget of 8.83 trillion naira ($28.9 billion). Budgets under President Buhari have been Nigeria’s largest ever but has failed to provide the type of capital spending needed to improve infrastructure due to funding issues.



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