There’s a scope to raise rates before the elections in February, says Nigeria central bank

The Central Bank of Nigeria may tighten and increase its main interest rate if the nation’s inflation rate fails to decline to target levels before the elections in February 2019, according to Joseph Nnanna, deputy governor of the bank.

He said the economic and financial regulator is “in the mood” for tightening with regards to the monetary policy rate.

“There’s a scope to raise rates before the elections in February. The central bank is still in the mood for tightening,” he said, adding, “How fast are we going to tighten is what members haven’t agreed upon.”

Nnanna who spoke to Bloomberg on the sidelines of a conference in Egypt on Monday, said, “every member of the Monetary Policy Committee is certain that the monetary policy rate should increase if inflationary pressures build up,” adding that “Our intention is to ensure that the interest rate is kept positive in real terms.”

The bank has kept the MPC key rate at a record 14 percent since 2016 in a bid to prop up the naira and tame inflation after it spiked to double digits. Although price growth has since slowed to below the monetary policy rate, some members voted for rate cuts in January and in July, three of ten members voted for higher rates.

Nnanna explained further that, “These factors would warrant a rate increase to send the right signal to the public, that the central bank will tighten policy to respond to higher inflation.

He argued that investors see Nigeria as an attractive market due to the stable naira and the yield curve on fixed-income instruments that’s higher than in the U.S. or Europe. He said he was not worried about reversal of capital flows.

“If any investor wants to exit the market, we shall meet them at the door and write a check and give them their money,” he said.

Nigeria goes to the poll next February amidst concerns around pre-elections’ spending and their implications on the economy.