(Updates with central bank governor’s comment in fifth paragraph.)
July 27 (Bloomberg) -- Nigerian central bank Governor Lamido Sanusi said yesterday’s increase in the benchmark interest rate to 8.75 percent aimed to attract more capital into the country and lift foreign currency reserves.
Nigeria needs to guard against a drop in the price of oil, its main export, as the U.S. and European debt crisis deepens, Sanusi said in an interview today on CNBC Africa television.
“Higher rates will help us attract inflows to reduce pressure on our foreign reserves,” he said.
Africa’s top oil producer depends on exports of the commodity for more than 95 percent of foreign exchange income and more than 80 percent of government revenue, according to the Finance Ministry. The 2011 budget of 4.5 trillion naira ($29.5 billion) is based on a crude oil price of $75 a barrel.
“Revenue projections are not being met” and the government is at risk of a structural deficit, Sanusi said.
Yesterday’s three-quarter-point rate increase was the fourth this year. The central bank cited higher energy costs from the planned removal of a fuel subsidy and increased spending to meet the new minimum wage of 18,000 naira a month.
The central bank of sub-Saharan Africa’s second-biggest economy has been using foreign-currency reserves to keep the naira within a 3 percentage-point band above or below 150 per dollar at its twice-weekly auctions.
Gross foreign currency reserves were $33.36 billion on July 25, compared with $34.21 billion the week earlier and $32.31 billion the month earlier. Reserves peaked at $63 billion in 2008.
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