The Central Bank of Nigeria has raised its benchmark interest rate to 14 percent, a 10-year high, as the naira currency continues its free-fall and the West African oil producer heads into recession.

Bank Gov. Godwin Emefiele on Tuesday said the rate hike will encourage savings and investment.

Nigeria is suffering inflation running at 16.5 percent, and the oil-dependent government is short of cash and foreign currency because of low oil prices and output slashed by militant attacks.

Nigeria's government spent a year supporting the naira before allowing it to float in June. It has fallen from an official rate of 198 to 310 to the dollar while ordinary Nigerians are forced to buy the dollar at up to 378 naira on the parallel market.