Nigeria’s central bank (CBN) kept its key interest rate unchanged at 11.5% during its May 2021 meeting, as widely expected, after data showed the economy advanced by just 0.5% in the first quarter of 2021 from a year earlier, suggesting a slow recovery.
“The decision seems reasonable, as the CBN remains squeezed between the necessity to sustain the real economy, as growth remains fragile and to curb elevated inflation” Lagos-based CSL Stockbrokers said.
The outcome of the meeting is unlikely to result in any fundamental change in the fixed income market, according to CSL Stockbrokers who project the economy will grow by 2.3% in the second quarter of 2021 and forecast m/m headline inflation of 1.16% in May, which translates to a y/y reading of 18.10%.
Nigeria’s annual inflation rate declined slightly to 18.12% in April 2021 (from 18.17% in March), indicating the first decline in headline inflation in about 20 months, but remained well above the central bank’s target range of 6-9%, continuing a trend that began in 2015.
The country’s Minister of Finance, Budget, and National Planning, Dr Zainab Ahmed, while briefing State House correspondents on Wednesday (June 3) in Abuja disclosed that Nigeria’s food inflation will not drop as fast as other aspects of Nigerian inflation indices.
“But it is important to also see that the rate of food inflation also showed a slight dip and the rise in food index, which you will see if you check the detailed report, is driven by foods such as coffee, tea, cocoa, bread, cereals, soft drinks, milk, cheese, not basic food items like rice, maize, and millet,” Nairametrics quoted the Minister as saying.
Food inflation dropped to 22.72% in April from 22.95% recorded in March.
In 2020, the bank’s monetary policy committee cut the benchmark rate by 200 basis points to prop up Africa’s top oil exporter against the impact of lockdowns as GDP contracted 1.92% for the full year, which is the most since at least 1991 according to International Monetary Fund data.