Nigeria's central bank left its benchmark Monetary Policy Rate (MPR) at 14.0 percent, citing the importance of price stability and the limitations of monetary policy in influencing economic output and employment under conditions of stagflation.
The Central Bank of Nigeria (CBN), which has raised its rate by 300 basis points this year to restrain inflation, said economic growth is expected to remain "less robust" given the absence of fiscal space while there are signs that inflation is being contained from moderate price expectations in light of the tight monetary stance and an improved agricultural harvest.
Nigeria's inflation rate rose to 18.3 percent in October - the highest since October 2005 - from 17.9 percent in September on higher food prices, with the CBN saying the "incessant pressure on consumer prices continues to come from structural factors, including high cost of power and energy, transport, production factors, as well as rising prices of imports."
The average exchange rate of Nigeria's naira weakened from September 1 to October 27, with the central bank saying foreign exchange inflows had declined by 31.85 percent to US$957.37 million due to lower crude oil and other government revenues.
The naira was quoted at 316.5 to the U.S. dollar today, down 37 percent this year.
Total foreign exchange outflows had also fallen by 58.68 percent to US$1.015.08 billion during the same period despite the resumption of joint venture payments.
The central bank's policy committee "implored" the bank's management to continue to make foreign exchange available to agriculture and manufacturing sectors by enforcing the policy of allocating 60 percent of available foreign exchange to these sectors.
Nigeria's Gross Domestic Product contracted by an annual rate of 2.24 percent in the third quarter of this year, down from minus 2.06 percent in the second quarter and minus 0.36 percent in the first.
"The MPC noted that they key undercurrents - shortage of foreign exchange, low fiscal activity, high energy prices and the accumulation of salary arrears, especially at the sub-national levels of government, continued in the third quarter of the year," the CBN said.
It added that these conditions could not have been improved by monetary policy instruments directly and there is a need to engineer monetary policy in such as way that gives fiscal policy the space to improve public investment in infrastructure.
