LAGOS Reuters - Nigeria's central bank has hiked its main lending rate by 150 basis points to 15.50%, its highest level yet and more than forecast, forging ahead with efforts to rein in inflation and ease pressure on the currency.
A Reuters poll of economists had predicted a much smaller 50 basis point hike.
But with inflation at its highest in 17 years, the Monetary Policy Committee had to take an aggressive stance, according to the Governor of Central Bank of Nigeria, Godwin Emefiele.
In August, the annual inflation increased for the seventh consecutive month to 20.52%, from 19.64% in July.
Tuesday's rate hike, the third in a row, means the central bank has delivered a total of 400 basis-point increase this year, its most hawkish in a single cycle, analysts said.
The benchmark interest rate was introduced in 2006.
Emefiele told a news conference that the MPC noted that a tight policy stance would help consolidate the impact of the last two policy rate hikes, which is already reflected in the slowing growth rate of money supply.
Emefiele said that an aggressive rate hike would slow capital outflows and help to attract capital inflows and appreciate the naira currency.
The naira currency weakened to a new low of 725 against the dollar on the black market this week, traders said, and within a band of 415 -- 435 on the official market.
Emefiele increased the cash reserve requirements for banks to mop liquidity from the market and stop currency speculation. He said banks that fail to raise their reserves would be barred from the foreign exchange market from Friday.
Economist Virg Frizs of Capital Economics said that the comments from Emefiele suggest that more monetary tightening lies in store High inflation, weak economic growth and mounting insecurity are major issues for voters as Nigeria heads for a national election in February, when incumbent President Muhammadu Buhari will step down.
Emefiele refused to rule out further rate hikes in order to fight inflation, despite responding to reporters' questions.