Nigeria Central Bank kept its interest rate unchanged and raised the deposit rate

Nigeria Central Bank kept its benchmark interest rate unchanged and raised the deposit rate, as it seeks to bring inflation below 10 percent.

The policy rate remained at 6.25 percent, Lamido Sanusi, Governor of Central Bank of Nigeria, told reporters today in Abuja, the capital. The lending rate rose one percentage point to 4.25 percent while interest rates remained at 8.25 percent, he said.

"The decision was close," with policy-makers vote of six to four to leave the key rate on hold, Sanusi said. "It could have gone either."

Inflation was little changed at 13.4 percent last month, compared with 13.6 percent the previous month and the central bank's target of less than 10 percent. The persistence of high inflation remains a challenge, Sanusi said, while reaffirming the bank's commitment to price stability and exchange rate.

The tightening of the debt ratio is justified "given the high inflation and recent pressure on foreign reserves," said Razia Khan, regional head of Africa research at London-based Standard Chartered Bank, today in a note sent by e-mail.

Foreign exchange reserves stood at 34.3 billion U.S. dollars as of November 15, compared with 34.6 billion U.S. dollars in late October, Sanusi said. Reserves, which totaled U.S. $ 58 billion in March 2008, have been used to defend the local currency after an increase in demand for local rice dollars and importers of fuel, he said. Some foreign companies operating in the country also bought foreign currency to pay debts and dividends, Sanusi said.

"Need to tighten"

The members of the monetary policy committee "agreed on the need to push, but the discussions focused on how and when the adjustment," said Sanusi. The interest rate remained unchanged, "the need to maintain flexibility and allow the effect of the decision on interest rates to work through the system," he said.

The economics of African oil producer's largest and most populous country will expand 7.8 percent this year, up 7 percent last year, Sanusi said.