* Base rate stays at 12 pct, no change since October's hike
* Central Bank happier with government's fiscal stance
* Inflationary pressures a concern dispute February dip (Adds quotes, context, background)
By Camillus Eboh
ABUJA, March 20 (Reuters) - Nigeria's central bank praised government steps to tighten fiscal policy in the face of growing inflationary pressures, and held rates at 12 percent, as expected by analysts and despite parliament voting through increased budget spending.
Nigeria - Africa's top oil producer and second biggest economy - is closely watched by emerging market investors and Africa-focused funds.
Its economy is one of the fastest growing in the world, but has been marred by poor management of its huge oil revenues.
A Reuters poll of analysts on Monday had unanimously expected rates to stay on hold.
"The committee commended the fiscal authorities for the discipline being introduced into government spending, the tightening of fiscal controls and the renewed focus on spending on capital projects," Governor Lamido Sanusi said in a speech.
He noted a "resurgence of an inflationary threat to the economy" from higher fuel prices, amongst other things.
But he said February inflation had been moderated by several factors, including "a re-allocation of spending by consumers caused by a rise in fuel prices (in January)" and "a slow down in fiscal spending and ... strengthening of the naira."
Nigeria's inflation rate eased in February as the removal of fuel subsidies had a more muted impact on prices than forecast, official figures showed on Tuesday.
Sanusi commended the government for reducing its oil price benchmark in the 2012 budget passed last week - despite last minute moves by parliament that diluted it by putting it up to $72 from $70 per barrel - saying the improved fiscal stance would help dampen demand.
"Although parliament passed it with a higher benchmark it is still pegged at a lower level than the $75 a barrel in the 2011 budget," he said. "In light of the above ... the committee unanimously decided .. (to) retain MPR at 12 percent with an interest rate corridor of plus or minus 200 basis points."
The cash reserve ratio was kept at 8 percent and the liquidity ratio at 30 percent.
The bank raised rates to 12 percent in a surprise move late last year to support the naira currency after a broader sell-off of riskier assets hit currencies across much of Africa.
Nigeria's lower and upper house agreed total expenditure of 4.88 trillion naira ($31 billion), increased from 4.65 trillion proposed by Finance Minister Ngozi Okonjo-Iweala last month, but the increases were seen as slight.
President Goodluck Jonathan blocked the changes the last time parliament tried to increase spending, but he is seen as unlikely to do so this time because the adjustments are relatively small.
Sanusi told Reuters over the weekend he was broadly satisfied with government efforts at tightening up fiscal policy, even with parliament's move to inflate the budget.
"The increase as I understand it, is principally in capital expenditure and not recurrent or revenue expenditure. And ... is being funded by some new sources of revenue such as signature bonuses in the oil industry," Sanusi told a question and answer session after the October rate hike.
Huge scepticism remains however over the government's ability to contain spending, reflected in a continual raiding of its oil savings in the excess crude account (ECA) over the past few years, while oil prices have stuck at historic highs.
But analysts agree with Sanusi that a stricter benchmark and focus on capital expenditure are encouraging.
"While spending is set to increase in 2012, encouragingly - by our estimates - much of this is accounted for by higher capital expenditure, and the development: recurrent spending ratio is also more positive," said Razia Khan, head of Africa Research at Standard Chartered Bank.
After seeing falls last year, Nigeria's markets are recovering, with the main stock index up 1.62 percent since the start of the year and the naira recovering to 157.65 to a dollar, from 162 naira at the start of the year. The markets closed before the rates decision. ($1 = 157.6500 naira) (Writing by Tim Cocks; editing by Ron Askew)