CBN retains 12% lending rate

Sanusi said the Gross Domestic Product growth rate of 6.72 per cent forecast for the second quarter of 2013 might not be achieved in view of the risk factors. He said the factors included widespread insecurity, weak infrastructure and probable flooding from the projected heavy rains in some parts of the country. Sanusi said,  “the state of emergency in the three states and the accompanying  military operations in that axis have the potential to adversely affect economic activities generally, including agricultural production and food prices as well as consumer demand.’’

He said that the high level of spending on military operations might increase the rate of inflation, “even though inflation is projected to remain at single digit in the next six months.’’ The governor said most sectors of the economy showed improved performance in the first quarter when compared with what was recorded in the first quarter of 2012.

He said the MPC was concerned about short term prospects in the oil sector, possible reduction in oil prices and continuing leakages in oil production due to bunkering and other illegal activities. While reviewing the economy in the first five months of the year, Sanusi said that headline inflation increased from 8.6 per cent in March to 9.1 per cent in April.  Sanusi said the inflation rate still remained within the target range for the fourth consecutive month. He said food inflation was 10 per cent year-on-year in April compared with 9.5 per cent in March, while core inflation declined further to 6.9 per cent from 7.2 per cent in March. He noted that the inflation outlook remained relatively stable and attributed the feat to a combination of a base effect and the success of tight monetary policy.