ABUJA - Nigeria's central bank raised its benchmark lending rate to 14.0% from 13.0% on Tuesday to tame soaring inflation, and warned of further tightening if prices continued rising.
Governor Godwin Emefiele said a previous 150 basis points rate increase in May had not permeated enough in the economy to halt rising inflation, which came in at 18.6% in June, its highest level in more than five years.
Emefiele said all members of the 11-member monetary policy committee (MPC) voted for rates to rise at the latest meeting, although they differed over the size of the increase. Six MPC members, a majority, voted for a 100 basis point increase.
"Members were unanimous that given the aggressive increase in inflation, coupled with the resultant negative consequences particularly on (the) purchasing power of the poor, ... there is a need to continue to tighten (policy)" said Emefiele.
"However the policy dilemma was hinged around the level of tightening needed to rein in inflation without dampening manufacturing output, which could result from the higher cost of borrowing."
Emefiele said if inflation continued on an upward trajectory the bank would continue with its tightening policy.
The country's naira currency was quoted at a new record low on the black market after the rate decision was announced, traders said.
Inflation in Nigeria is being driven by rising prices of staples like bread, rice and maize and the cost of diesel, which is widely used to generate power.
(Reporting by Chijioke Ohuocha and MacDonald Dzirutwe, Writing by Alexander Winning Editing by James Macharia Chege)