Nigeria's central bank holds interest rates to support growth

ABUJA: Nigeria's central bank held its benchmark interest rate at 11.5% on Tuesday, the bank's governor Godwin Emefiele told a briefing, as it tries to support the country's fragile growth and combat rising inflation.

Emefiele said Nigeria faces stagflation - a situation where inflation is rising and growth is weak - but the government is confronted by low revenues that hamper its ability to stimulate the economy.

He said all members of the monetary policy committee voted to hold rates, marking the fourth decision to hold since the bank cut rates in September.

The central bank has pursued an accommodative policy to try to support the economy but dollar shortages have stoked inflation, while a shrinking labour market and mounting insecurity have pressured households.

Emefiele was silent on clearing a backlog of dollar demand to help relieve pressure on the naira's exchange rate, which has weakened on the spot market after the central bank allowed the currency to weaken on the official market.

He said the bank was no longer dealing in the 380 naira official rate, which it had held since July last year.

"We will try as much as possible to be pro-growth," Emefiele told the virtual briefing, where he announced the outcome of the meeting.

Nigeria's economy grew 0.5% in the first quarter, lifted by higher crude production and oil prices, as activity slowly gains momentum with the gradual easing of coronavirus lockdowns.

The country was grappling with low growth before the COVID-19 pandemic triggered a recession and created large financing gaps. With weak growth, few expected the central bank to alter interest rates after it cut them last September.