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The Central Bank of Nigeria has kept its key interest rate unchanged at 14 per cent, in line with market expectations as the country grapples with economic recession, soaring inflation and a managed exchange rate.

The monetary policy committee has held the rate since July and economists and analysts had not expected it to make an adjustment.

The West African nation is in its worst economic crisis in decades because of low oil prices and declining crude output. Inflation eased for the first time in 15 months in February, but is still at nearly 17.8 per cent. The economy contracted by 1.5 per cent last year for the first time in 25 years.

Currency policy has been front and center throughout the economic crisis because the central bank has maintained a managed currency float and restricted access to dollars for manufacturers, hurting the non-oil economy. Godwin Emefiele, central bank governor, did not announce any changes in foreign exchange policy after the committee’s meeting.

The central bank has in the past two weeks narrowed the gap between the official and parallel markets by pumping dollars into the official market to depreciate the naira.

But Mr Emefiele did not indicate on Tuesday that he will allow a more flexible exchange rate. Earlier this month the government released an economic recovery plan which proposed allowing a market-determined exchange rate, but analysts are skeptical about whether this shift could take place on the watch of Muhammadu Buhari. The president has previously made clear he does not want the naira to weaken, though the leader – who recently returned from a lengthy stay in London for medical treatment — has not recently commented on monetary policy.

“The CBN MPC meeting very much delivering the status quo in all respects – both in holding rates steady, and with no announced changes on FX policy,” said Razia Khan, Chief Africa Economist at Standard Chartered in London.

At this stage the CBN’s interpretation of the ‘currency flexibility’ promised in the economic recovery and growth plan seems limited to its stepped-up pace of FX sales, rather than signalling anything more just yet. However, it is telling that the CBN appears to have resisted the pressure from the fiscal authorities to cut rates. This still leaves open the possibility of more meaningful liberalisation at a later stage. What is clear is that the CBN is intent on achieving a greater degree of FX convergence in the near-term.

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