Benchmark Lending Rates Climb

Reuters anounced the other day that the Nigeria’s central bank unexpectedly increased its benchmark lending rate by 25 basis points on Tuesday. This caught most of the analysts off guard as Nigeria directed its interest from building growth to battling inflation.

Central bank governor Lamido Sanusi has tended to emphasize economic progress in Africa’s biggest oil producer ahead of maintaining a lid on price rises, specifically following a near collapse of the banking system last year.

Nevertheless, Sanusi said reforms launched since he bailed out nine banking institutions a year ago meant there was now flexibility for monetary tightening up, raising the benchmark lending interest rate to 6.25 percent from 6.0 percent in the first increase in more than a year.

“The committee is completely satisfied that ample improvement has been made in banking sector reforms to mitigate the risk of monetary tightening to financial institutions,” he shared with a news conference in the capital, Abuja.

He also narrowed the interest rate lending and deposit corridor for commercial banks that sits either side of the bank’s benchmark level by lifting the deposit rate to 3 percent below the benchmark from 5 percent up until now.

Analysts stated the two moves — essentially a raising of official deposit and lending rates to 3.25 and 8.25 percent respectively — proved resolve to tame rising prices that quickened to 13.7 percent year-on-year in August from 13.0 percent the previous month.

This comes after the State Bank Of India increased their benchmark lending rates by 0.5% in August and Canada increased their benchmark lending rates in June – both seemingly bothered about inflation on the back of strong growth.

Conversely the Federal Bank reiterated that it is going to retain the benchmark lending rate in a range of zero to 0.25 percent “for an prolonged timeframe.”