ABUJA-Central Bank of Nigeria, CBN, increased its key lending rate, the Monetary Policy Rate, MPR, by 275 basis points to bolster the naira and curb price pressures in Africa’s biggest oil producer.

Governor Lamido Sanusi raised the policy rate to 12 per cent after chairing a special Monetary Policy Committee meeting in Abuja, Monday.

The median forecast of 11 economists in a Bloomberg survey was for the rate to rise to 10.25 per cent. The bank also lifted the cash-reserve ratio to 8 per cent from 4 per cent.

The naira slumped 7.8 per cent against the dollar since the beginning of August, adding to pressure on inflation as the government prepares to end fuel subsidies and raise spending next year. That threatened to push inflation, which eased to 9.3 per cent in August, above CBN’s target of 10 per cent.

“They need to raise rates aggressively,” said Samir Gadio, an economist at Standard Bank Group Ltd., Africa’s biggest lender, said in a phone interview from London.

“The target is to have inflation in the single digits. The recent currency weakness can have a lagging effect.”

CBN has been drawing down foreign-currency reserves to keep the naira within a 3 percentage-point band above or below 150 per dollar at its twice-weekly auctions.

The naira broke through that level for a third time on October 5, after the bank failed to meet mounting dollar demand for the 24th straight auction. Reserves have dropped 5 percent to $31.3 billion between September 26 and October 5.

Before today, the MPC had increased its benchmark interest rate at six of the past seven meetings by a total of 3.25 percentage points.

Inflation may accelerate next year as the government prepares to remove a subsidy on fuel, saving it 1.2 trillion naira ($7.5 billion). Nigeria earns 80 percent of government revenue from oil, the price of which has slumped 16 percent in New York since June 1, reaching as low as $75.67 a barrel on October 4.