JOHANNESBURG: Uncertainty about the outcome of this weekend's presidential election will prompt Nigeria's central bank to keep interest rates on hold at a meeting on Tuesday, but a rise is likely in the second quarter, a Reuters poll found on Monday.
Africa's biggest oil producer has been hit by the plunge in oil prices and a crisis in the naira is stoking inflation.
"At this point it is sensitive because of the elections, I don't see them doing anything at this point, but they will have to raise rates after the elections," said Aly Khan Satchu, an independent trader at Rich Management in Nairobi.
"The other worry is that the oil price is going down again," Satchu said.
The poll forecast that Nigeria's benchmark interest rate, which has been at 13 percent since November when it was raised for the first time in two years, will rise 100 basis points to 14 percent in the second quarter.
By the end this year the benchmark rate will be at 14.50 percent, the poll predicts.
Two out of eight economists polled about the outlook beyond Tuesday's meeting, however, said Nigeria would need to be even more aggressive in fighting the currency's decline.
Capital Economics sees the rate at 15.00 percent by the end of the second quarter while Rich Management sees it at 15.50 percent.
"We are predicting an increase of 200 basis points within a few months," said John Ashbourne at Capital Economics.
The naira suffered its biggest monthly decline in more than five years last month due to concerns over political uncertainty after the election, originally scheduled to take place on Feb. 14, was delayed to the end of March.
The fall in the currency prompted authorities to increase year-end estimates for inflation to around 9 percent, the upper end of the central bank's target, from its January forecast of 8.78 percent for this year.
The central bank has intervened heavily in the market and introduced a number of measures to try and stabilise the currency, including a one-off devaluation in November. The currency has been more stable this month.
A separate Reuters poll late last month forecast oil prices would rebound in the second half of this year. Brent crude fell below $55 a barrel on Monday, however.
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