BUSINESS: CBN Retains Interest Rate At 14%, CRR - 22.5%

CBN Retains Interest Rate At 14%, CRR - 22.5%
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The Monetary Policy Committee (MPC) of the Central Bank of NIgeria (CBN) on Tuesday, 26th September 2017 retained the Monetary Policy Rate (MPR) at 14 per cent due to uncertainties in the global market.

The Governor of the CBN, Mr. Godwin Emefiele disclosed this while briefing newsmen on the outcome of the 258th meeting of the MPC in Abuja.

He said: “MPC decided to retain MPR at 14 per cent, retain CRR at 22.5 per cent, retain the liquidity ratio at 30 per cent, retain assymetric corridor at +200 and -500 bases point around the monetary policy rate.’’

He stressed that the MPR was not eased at this time because it would signal the committees’ sensitivity to growth and employment concern by encouraging the flow of credit to the real economy.

Mr. Emefiele added: “The MPC noted the liquidity suffering in the banking system and continuous weakness in financial intermediation.

“It agreed on the need to support growth without jeopardising price stability or offsetting other recovering macroeconomic indicators, particularly the relative stability in the Foreign Exchange (Forex) market.

“The MPC thinks that easing at this point would signal the committee’s sensitivity to growth and employment concern by encouraging the flow of credit to the real economy.

“It observed that easing at this time would reduce the cost of debt service which is actually crowding out government’s expenditure.

“Also, the risk to easing would further pull the real interest rate down into negative territory.”
Emefiele said the argument for holding was to ensure workability of the past policies in the economy.

According to the CBN boss, the MPC factored that the high banking system liquidity level, the need to continue to attract foreign investment inflow to support the forex market and economic activity would cause a jump in the system liquidity.

He further highlighted that, the expansive outlook for fiscal policy in the rest of the year and the prospective election related spending will also cause a jump in the system liquidity among other things.

The Rostrum Financial Crew gathered that the committee expressed concern over the increasing fiscal deficit estimated at over N2.51 trillion in the first half of 2017 and the crowding out effect of high government borrowing.

Scripted by: Rostrum










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