(Adds analyst, banks safe)
By Chijioke Ohuocha and Camillus Eboh
ABUJA, March 21 (Reuters) - Nigeria's central bank
raised its benchmark lending rate by 50 basis points to 18% on Tuesday as monetary authorities continued to
tighten policy to rein in inflation which has squeezed consumer
purchasing power.
The high cost of living was among major concerns for voters
during last month's disputed presidential election that was won
by ruling party's Bola Tinubu, who has promised to revive the
economy and end widespread insecurity.
The central bank's latest rate hike came after last week's
inflation data showed price rises quickened in February despite
the recent cashless policy meant to reduce the amount of
currency in circulation. Inflation also rose in January.
Central Bank of Nigeria governor Godwin Emefiele said
members of the Monetary Policy Committee were unanimous in
raising rates, citing price and exchange rate pressures and
expectations of the removal of a petrol subsidy that cost $10
billion last year.
"These, in view of members, provided a compelling argument
for an upward adjustment of policy rates, albeit less
aggressively," Emefiele said.
Razia Khan, head of research, Africa and Middle East at
Standard Chartered Bank, said inflation risks remained on the
upside but the pace of tightening was more moderate in order to
reduce negative real interest rates.
Investors are looking at how quickly the petrol subsidy will
be removed as Tinubu prepares to get into office on May 29.
"In terms of reform, there are now firm expectations that we
should see fuel subsidy reforms commencing imminently. Less
clear is the time frame for any FX policy adjustment," Khan
said.
"FX adjustment would likely have to precede any meaningful
portfolio inflows, but current global volatility and its impact
on the oil price could see fuel subsidy reforms being given
prominence near-term, with FX reforms to follow, only later."
Emefiele said Nigeria's banks remained sound and would not
be affected by the impact of the collapse of two U.S. lenders
and problems at Credit Suisse.
(Reporting by Chijioke Ohuocha, Camillus Eboh and MacDonald
Dzirutwe; Editing by James Macharia Chege and Alison Williams)
Reuters Messaging: james.macharia.thomsonreuters@reuters.net))
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