Bloomberg News

Nigeria Needs Naira Stability to Curb Prices, Moghalu Says

July 01, 2011

(Updates with inflation in third paragraph.)

July 1 (Bloomberg) -- Nigeria, Africa’s biggest oil producer, needs a stable currency to keep inflation under control, central bank Deputy Governor Kingsley Moghalu said.

“If we lose stability of the exchange rate, then we’ve lost everything,” Moghalu told central bankers in South Africa’s capital, Pretoria, today.

The central bank has sold dollars, cutting into foreign currency reserves, to keep the naira within a range of 3 percent above or below 150 per dollar at its twice-weekly auctions. Its goal is to reduce the inflation rate, which reached 12.4 percent in May, to below 10 percent.

“We do expect a slight appreciation of the naira’s value before the end of the year” after restrictions on foreign investors’ debt holdings were lifted, Moghalu said.

The naira jumped to a more than six-month high of 150.125 against the dollar in interbank trading in Lagos after the change came into effect today.

The bank also wants a “normalization” of interest rates, Moghalu said. It raised the benchmark rate for a third time this year in May, pushing it to 8 percent.

--Editors: Philip Sanders, Karl Maier

To contact the reporter on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net; Maram Mazen in Johannesburg at mmazen@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.


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