CBN forecasts higher inflation

[DT]

The Central Bank of Nigeria yesterday predicted there would be higher prices of commodities in the country this year.

Central bank governor Sanusi Lamido Sanusi said the partial removal of fuel subsidy and the plan by the National Assembly to increase the N4.7 trillion budget presented to it in December by President Goodluck Jonathan are factors that could push up prices. Sanusi said at a news conference after the Monetary Policy Committee meeting in Abuja that inflation is likely to increase from the current 10.3 per cent to 14.5 per cent by the middle of this year before reducing towards single digits by the end of 2013.

The Federal Government removed fuel subsidies on January 1, but restored part of the subsidy after two weeks of national protests, pegging petrol price at N97 per litre. This pushed up the cost of goods and services.

"The committee noted that historically an upward adjustment in the price of PMS (petrol) has tended to have a short-term impact on the rate of inflation," Sanusi said.

Last year, the central bank increased the interest rates by six times from 6 per cent to 12 per cent with the aim of controlling inflation, but the year ended still with a double digit inflation of 10.3 per cent.

The National Bureau of Statistics had attributed rise in inflation throughout last year to increase in prices of food stuffs.

The central bank governor said the expected upward impact on inflation from removing fuel import subsidies would be short-term.

Also yesterday, CBN said it was leaving the naira to trade within at 150-160 to the dollar. It left the cash reserve required to be held by banks at 8 per cent of deposits.

The naira has shown signs of recovering after CBN lowered its target band in November, due to prolonged naira weakness and high U.S. dollar demand.

The naira traded at N161 to the dollar yesterday, slightly weaker than the CBN's preferred trading band of N150-160 against the dollar.

DailyTrust