Nigerian Central Bank Governor Lamido Sanusi made the following comments after a meeting today of the bank’s monetary policy committee in Abuja, the capital.
On inflation outlook this and next year:
“Our own estimate is that we probably might have an uptick of inflation in December. We do think the headline numbers and food numbers will probably be somewhat lower, actually heading toward 10 percent” early next year.
“A significant part of that would be the base effects. Remember that in early January this year there was an increase in oil prices and therefore a sharp uptick of inflation, so unless you have a similar shock in December, the base effect is likely to lead to a moderation in those headline numbers.
‘‘But that doesn’t mean you have a moderation in the underlying inflationary pressures, because if you look at the food index for October, what was interesting was that food prices weren’t driven by one or two commodities. It was an across-the-board increase.
‘‘When you’ve got such broad-based pressures, you tend to be a bit cautious in forecasts of a deceleration that is very quick.’’
On naira stability:
‘‘For the naira, our stance remains the same. We’ve always considered a stable exchange rate critical to the anchoring of price expectations. We’re under no pressure to change. We’re not looking for a strong appreciation. We’re also not looking for a strong depreciation. We’re an open economy.
‘‘Unfortunately we’re too import-dependent. Therefore, a weak currency doesn’t import our exports, given the fact that we’re an oil producing country, whose commodity is denominated in dollars anyway and whose price is determined by the international markets. So we don’t get much mileage by weakening our currency.
‘‘In the same vein, there’s no benefit in running down reserves to have a very strong currency. You make imports cheap, you increase the import-dependent nature of the economy, and you reduce your ability to cope with external shocks.
‘‘So, the key is to have stability. The key is to build up reserves. But far more important for the government to make progress on the structural reforms in the power sector, in the agricultural sector, which will then reduce the dependence of the economy on oil and the vulnerability to commodity price shocks.”
On concerns over the global economy:
“The slowdown in the U.S. is just one part of the problem. Europe is in recession. The rest of the emerging markets are slowing down. The only thing keeping the oil price up is the uncertainty and instability in the Middle East. And if it goes down we might find ourselves in a situation where we’re basically moving from one end to another as far as monetary policy is concerned.
‘‘So in view of all those uncertainties, we’ve done well so far. We believe we should continue to hold our position until we have clarity on what’s happening outside there.”
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