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By Camillus Eboh
ABUJA, Sept 20 Nigeria's central bank kept its
benchmark interest rate at 14 percent on Tuesday, resisting the
finance minister's call to lower borrowing costs, and its
policymakers urged the government to spend more to drag Africa's
top economy out of recession.
The West African nation is going through its first recession
in more than 20 years, brought on by low oil prices, and
inflation accelerated to an 11-year high of 17.6 percent in
August. The naira has traded at a record low of 425 to the
dollar on the parallel market since last week.
Finance Minister Kemi Adeosun said on Monday the central
bank should lower interest rates so that the government can
borrow domestically to boost the economy.
But after raising the benchmark rate by 200 basis points to
14 percent when it last met in July, the monetary policy
committee decided to leave it unchanged this month.
Central bank governor Godwin Emefiele said the MPC had
considered calls for a rate cut but concluded that the biggest
challenges the economy faces were "unsystematic and incomplete
structural reforms" which raised "cost, risk and uncertainty".
As well as defying Adeosun's call for lower rates, the
committee members told the government it should "intensify"
infrastructure spending to stimulate growth.
"Members emphasised that improved fiscal activities,
especially the active implementation of the 2016 federal budget,
and payment of salaries by states and local governments would go
a long way in contributing to economic recovery," Emefiele said.
"In the same direction, the committee urged the fiscal
authorities to consider tax incentives as a stimulus on both
supply and demand side of economic activities."
President Muhammadu Buhari took office in May 2015 with a
promise to diversify the economy but critics say his government
has done little in terms of concrete policies to end Nigeria's
reliance on oil revenues, which have collapsed.
Economists polled by Reuters last week had predicted that
the central bank would keep its benchmark interest rate at 14
percent and reiterate its focus on resuscitating growth.
"The Central Bank of Nigeria disappointed our expectation
for further gradual interest rate tightening," Razia Khan, Chief
Economist Africa at Standard Chartered Bank, said.
"While the MPC resisted giving in to political pressure to
cut interest rates, and positive real market interest rates
provide an important mitigant to the lack of further policy
tightening, nonetheless, we expect markets to be disappointed
with this outcome."
But another economist praised the central bank (CBN) for
shrugging off political pressure.
"CBN's refusal to bow to government pressure is a notable
sign of the institution's independence," said John Ashbourne of
(Reporting by Ulf Laessing, Alexis Akwaqyiram, Chijioke Ohuocha
and Oludare Mayowa; Editing by Catherine Evans)