Nigeria has resorted to unorthodox monetary policy, slashing interest rates at a time when African central banks from Ghana to Zambia, South Africa and Mozambique are tightening monetary screws in anticipation of a a Fed rate hike.
Bloomberg quoted John Ashbourne, Africa economist at Capital Economics in London, as saying:
“Nigeria faces high inflation, pressure on its currency, and it desperately needs to attract foreign capital to fund the current account deficit created by low oil prices. It is, in short, in exactly the sort of situation in which economists would generally expect – and recommend – tighter monetary policy.”
I have been in both Ghana and Mozambique in the past few months, and have seen first hand how policy makers in Africa are struggling to curb inflation risks stemming from weak currencies. Nigeria's central bankers have moved in the opposite direction and I will watch with interest where they lead the economy with their policy choices.