Saturday, 29 September 2018


The Central Bank of Nigeria’s (CBN) decision to leave key rates unchanged at 14% confirms how external and domestic factors have placed the central bank in a difficult position.

Higher US interests have accelerated capital outflows and led to a drop in external reserves while global trade tensions continue to weigh on sentiment.

Rising consumer prices amid pre-election spending remain another headache for the CBN, while political uncertainties add to the equation of components complicating any efforts to cut interest rates. With crude oil price volatility from US-China trade tensions presenting a significant threat to Nigeria’s economic recovery, the CBN could maintain the status quo for the rest of 2018.

While a rate cut was initially seen as a strategy to support economic growth in Nigeria, such a move may end up widening the divergence in monetary policy between the Fed and CBN – ultimately accelerating capital outflows.

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