(Ecofin Agency) - A weak local currency and an inflation still above 16% may not allow the Central Bank of Nigeria (CBN) follow the footsteps of South Africa and Ghana in reducing interest rates, Bloomberg reports.

Even though price growth in Nigeria, slowed to 16.1% in June, it still remains above government’s target of 6-9%.

“Inflation still remains very high. It would be wrong to demonstrate too much complacency,” Razia Khan, head of Africa macro research at Standard Chartered Bank Plc, said.

A survey carried out by Bloomberg shows that only two out of 19 economists had predicted that the apex bank’s Monetary Policy Committee will reduce borrowing costs on Tuesday. Others had said that interest rates will remain at 14%.

It should be recalled that the Governor of CBN, Godwin Emefiele (photo), last month said that tight monetary policy will continue.

“The CBN will, in our view, maintain tight local currency liquidity conditions, not least to provide support to the naira. A policy rate cut would send the wrong signal,” JPMorgan analysts Sonja Keller and Yvette Babb said in a note to clients.

The Nigerian economy which competes with South Africa’s, contracted by 1.6% in 2016 as the oil industry shrank and growth in agriculture decelerated.

The International Monetary Fund (IMF) in its World Economic Outlook for July 2017, projected that the West African Country's economy will grow by at 1.9% in 2018, while South Africa’s will only improve by 1.2% due to elevated political uncertainty.

Anita Fatunji