By Vuyani Ndaba and Chijioke OhuochaJOHANNESBURG/LAGOS (Reuters) - Nigeria's central bank looks set to hold interest rates steady for the ninth time in a row on Tuesday, as it weighs falling inflation versus stronger economic growth and a weaker currency, analysts said.The naira closed at 158.70 naira against the U.S. dollar on Friday, remaining at a more than seven months low since Wednesday, owing to a sharp fall in bond buying by foreign investors.The fall in the naira prompted the central bank to intervene on Friday, with the unit strengthening 0.56 percent against the greenback. Yet naira weakness persisted.Eight out of 9 economists surveyed by Reuters on Friday expected the bank's monetary policy committee to hold benchmark rates at 12 percent. FCMB (UK) Limited forecast a cut to 11.50 percent."The main focus of the debate ... will be the inflation outlook ... and the recent weakness in the currency," said Andrea Masia, analyst at Morgan Stanley, adding that the implication of the 2013 budget will be key to rates.Inflation is now within the central bank's single digit target, but Governor Lamido Sanusi often expresses worries about external price pressures, and the bank has consistently seen a stable naira as a priority.Nigerian bond yields have fallen more than 300 basis points across maturities and yielded close to inflation, which is at 9 percent in January, after JP Morgan last year added the debt to its emerging sovereign bond index.The sell-off in bonds has hurt the naira, leaving the monetary policy committee divided about an early rate cut at next week's meeting, analysts say, noting that the impact of a looser fiscal stance this year will also tip in favour of holding rates."A cut in rate, which would have provided more support for bonds, looks unlikely ... given the still loose fiscal stance and the increase in the oil price benchmark in the 2013 budget," said Samir Gadio, emerging market strategist at Standard Bank.Nigerian President Goodluck Jonathan approved a 4.99 trillion naira budget passed by parliament last month, a rise from 4.92 trillion naira proposed earlier, ending two months of disputes over the spending plans.Sanusi said last month he would not be pressured into cutting interest rates soon, even with inflation meeting the single-digit target.The bank has kept rates on hold since November after six successive hikes last year - including a 275 basis point rise in October to 12 percent - to ward off speculation against the naira. The currency rose 1.8 percent against the dollar in 2012.The interest rate decision is expected from around 1330 GMT.
Posted on Saturday, 16 March 2013 06:11
March 16, 2013, 8:12 am