CBN Retains Interest Rate At 14% Despite Worsening Recession

CBN Governor, Godwin Emefiele
CBN Governor, Godwin Emefiele

The Monetary Policy Committee, MPC, of the Central Bank of Nigeria, CBN, has voted to retain interest rates in the country at 14%, despite calls from experts and economic managers, including the Minister of Finance, Kemi Adeosun, for a downward review.

Governor of the CBN, Godwin Emefiele, announced the decision of the committee on Tuesday, at the end of a two-day meeting held at the apex bank’s headquarters in Abuja.

He explained that all the 10 members of the committee present at the meeting agreed to maintain the current monetary policy rates.

Apart from the MPR which was retained at 14 percent, the CBN governor added that the committee also voted to retain the Cash Reserves Ratio at 22.5 percent.

The Liquidity Ratio, was also retained at 30 percent while the Asymmetric Window was left at +200 and -500 basis points around the MPR.

Recall that just before the last MPC meeting in September, the minister of finance urged the committee to consider bringing down the interest rate in order to enable more domestic borrowing by the federal government to boost the Economy.

“We need lower interest rates, because when we are borrowing and interest rates go up, it increases our cost of debt service and it reduces the amount of money that is available to spend on capital projects,” the minister said.

Similarly, former minister of agriculture and the current president of the Africa Development Bank, AfDB, Akinwumi Adesina, complained that Nigeria’s interest rates were “way too high.”

He said the AfDB was willing to assist Nigeria in this difficult period in its economy, but that the country needed to adopt more people-friendly monetary policies.

Adesina said: “The African Development Bank will rally strongly around Nigeria to overcome its recession.

“They (Nigeria) have a liquidity problem. We (AfDB) want to make sure Nigeria gets resilient.”

“(But) in our view it would be better to have gradual (customs) tariffs as opposed to (Forex) restrictions.






     

     

    “Attracting investment was the only way for the central bank to lower its interest rates. The interest rate is way too high.

    “You cannot drag the economy out of recession with those interest rates.”

    However, after the September MPC meeting, Emefiele announced that the CBN had decided to retain benchmark interest rate at 14% because “monetary policies alone could not totally save the economy.”

    He added that cutting rates without appropriate fiscal plans may not help the economy.

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