CBN maintains rates over rising fears of election, budget spendings
The Central Bank of Nigeria (CBN), yesterday, refused again to change the benchmark interest rate, but now on the reason that anticipated fund inflows would reverse the gains from inflation level.
For a 22-month period, the apex bank has held on to interest rate at 14 per cent, citing inflation level, which rose to a high of 18 per cent, but now moderated at 12.48 per cent.
CBN Governor, Godwin Emefiele, said: “The objective of the policy stance will be to accelerate the reduction in the rate of inflation to single digits, promote economic stability, boost investor confidence and promote foreign capital flows.”
He admitted that though inflation has moderated, it is still above the bank’s single-digit target and could get worse with the expected influx of cash from the implementation of Nigeria’s much-delayed 2018 budget and electioneering by the corner.
The development, which has taken some economists by surprise, has also prompted doubts as whether rate cuts will ever be possible with the falling inflation rates.
With the first quarter growth figures showing a slowdown, while inflation moderated further, analysts had expected that now is the best time to stimulate further the economy.
Granted, the nation’s inflation figures had spiked and the naira devalued sharply over oil price crisis, leading to recession, but the country has overcome the economic inactivity, as the commodity and production volume regained traction.
According to a report, Standard Chartered’s chief economist for Africa, Razia Khan, said that foreign exchange stability remains paramount.
“The CBN will not do anything to risk this. Not even easing, when the opportunity presents itself,” said Khan.
Noting that the economy is still weak, with a contracting money supply to the private sector, she pointed out that CBN has continued “to hint that easing remains on the cards, when conditions eventually permit it.”
But the President, Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs noted that there is a need for economic managers to stimulate interest rate sensitive sectors by lowering the rates considering that the economy is still largely static and fragile.
According to him, the federal government needs to relate with the Monetary Policy Committee to find ways and means of lowering interest rate to prevent the economy from being chocked and the rate of recovery being slowed down.
He also emphasised the need to fully operationalize the Development Bank of Nigeria (DBN) so as to cater for the huge credit needs of the industrial sector and fast-track the implementation of the Moveable Assets Collateral Registry system.
“In light of the country’s quest to further sustain this positive growth path as enunciated in the 2018 budget with a growth target of 3.5 percent, we recommend that the Government should effectively synthesize monetary and fiscal policies; the Federal Ministry of Finance, the CBN and the Federal Ministry of Budget and National Planning should further work together in developing policies that will move the non-oil sector forward”, he added.
On his part, the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, noted that the present interest rate regime is unattractive to investors.
He stated that the nation’s private sector is not reflective of the inclusion needed to drive growth that government seeks.
“There is need for domestic capital to drive investments and to achieve this, the environment needs to be an enabling one with attractive interest rates”, he added.
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