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Naira Gains as Central Bank Maintains Rates at Record High

By Afolabi Ogunde on September 18, 2012

The naira strengthened after the central bank kept its benchmark interest rates at a record high to support the currency and control inflation.

The currency of Africa’s biggest oil producer gained as much as 0.4 percent, before trading 0.1 percent stronger at 157.7 a dollar as of 4:46 p.m. on the interbank market in Lagos. The naira has appreciated 2.9 percent this year, the third-best performer in Africa, according to data compiled by Bloomberg.

Policy makers, led by Central Bank of Nigeria Governor Lamido Sanusi, held rates at 12 percent in a unanimous decision, to curb price pressures and support the naira.

Measures taken at the last meeting to stabilize foreign exchange and build reserves “were effective,” Sanusi told reporters today in Abuja, the capital. “The moderation in headline inflation has not been accompanied by a decline in core inflation,” he said.

The central bank has kept its policy rate unchanged at 12 percent this year after raising it by 5.75 percentage points in 2011 to curb price pressures. Inflation slowed to 11.7 percent in August from 12.8 percent in the previous month, the statistics agency said on its website yesterday. The core inflation rate, which excludes food prices, fell to 14.7 percent in August from 15 percent in July, according to the statistics office.

“The statement seems to express continued caution,” Leon Myburgh, an Africa strategist at Citigroup Inc. in Johannesburg, said in e-mailed comments today. “Capital inflows have increased and are likely to stay in-country according to the governor. This has added significantly to stabilizing the naira and building CBN foreign exchange reserves.”

Source: Bloomberg

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