Why Nigeria Central Bank retained benchmark lending rate at 14 per cent – Emefiele

CBN Governor, Godwin Emefiele
CBN Governor, Godwin Emefiele

The Governor of the Central Bank of Nigeria, CBN, Godwin Emefiele, on Tuesday said the benchmark lending rate for banks in the country was retained for the seventh consecutive time at 14 per cent to maintain the modest stability in the foreign exchange market.

The CBN governor told journalists at the end of the 114th meeting of the Monetary Policy Committee, MPC, that majority of the members resolved to retain the monetary policy rate, MPR, which is the controlling lending rate to banks, at 14 per cent.

Although he acknowledged that Nigeria’s economy was on the path of moderate recovery, he said the committee also decided to leave the cash reserve ratio, CRR at 22.5 per cent; liquidity ratio at 30 per cent, and asymmetric corridor at +200 and -500 basis points around the MPR.

He said the decision to leave the interest rates unchanged was informed by the need to continue to attract foreign investment inflow to support the foreign exchange market, and to promote economic activity.

Although the CBN governor said low-interest rate was necessary, to make it easy for businesses to borrow at low-interest rates and for easy injection of liquidity into the financial system, the MPC resolved to keep the rate at 14 per cent, to help reverse the inflationary trend in the economy.

He recalled that inflation was at about 18.8 per cent when the CBN decided to freeze lending rate at 14 per cent, pointing out that even with inflation at 16 per cent as at June, it was still considered very high.

Based on studies conducted, and modules developed for computing inflation threshold, Mr. Emefiele said Nigeria’s inflation threshold ranged between an average of 10 and 12 per cent.

“Any inflation rate above the upper limit of 12 per cent would create a negative impact of retarding, rather than stimulating growth, no matter the action taken,” he said.

“The CBN was interested in how to reverse the inflationary trend. We are happy we have done so, by bringing the rate from 18.8 per cent to 16.1 per cent. We are hopeful that it will continue to trend down wards.

“We are not there yet. But, CBN believes easing the interest rate now will pull the real interest rate further to a negative territory, which is a disincentive to investment. This will hurt the stability we have suffered to achieve in the foreign exchange market and a need to ensure that that does not happen,” Mr. Emefiele said.

The governor said the committee expressed concerns about the rising fiscal deficit currently at about N2.51 trillion in the first half of 2017 and the pressure on high government borrowing.

Urging fiscal restraint to check the growing deficit, the CBN governor said the MPC supported government’s proposed issuance of sovereign-backed promissory notes of about N3.4 trillion for the settlement of accumulated local debt and contractors’ arrears.

The Committee, however, urged caution in monitoring the release of the promissory notes to avoid excessive injection of liquidity into the system, which is capable of removing the gains so far achieved in inflation and exchange rate stability.


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  • Wale

    The thing is, can someone explain to me WHY this guy is still the governor of CBN.
    This guy is responsible for ditching out humongous cash of money from the vault of CBN to looters Inc. yet, this APC folks are so “impotent” bout that.
    Fighting corruption INDEED.

    • 0tile

      Your assertion without any iota of truth or substance is most irresponsible. Prove your point.

      • Wale

        Dasuki said so.
        Ayo Oke the $50 million (Ikoyi) guy said so and many others said same shit.

        • 0tile

          Do you no longer have law enforcement who can take care of the matter? Why has the matter died down, is to due to lack of proof or lack of political will?

          • Wale

            There’s no statue of limitation period on theft.
            We shall see about all of you looters of public funds.
            Mark my words.

          • 0tile

            Remember, justice delayed is justice denied. May hay while the sun shines.

          • Wale

            Sun is always shining it all depends on the gravitational rotation of globe (earth).
            It’s never too late to do anything worth done.

          • 0tile

            Making hay is a figure of speech. In politics time is very transient. A political mass murderer can get away with murder with a sudden change in political landscape or passage of time. The masses tend to have amnesia once events change. Is anybody in Gambia still demanding the decapitation of former president Yahaya today?

  • 0tile

    We are now waiting for the voodoo economist dele awogbeoloshi to jump in and put his usual stint to the whole thing. For some time now he hasn’t had the opportunity to attack and desperately try to discredit the World recognized economist Dr Iweala. This is dele’s awaited opportunity to assail her even-though Dr Iweala has left to serve grateful human beings better.

    This Emefiele man seems to be operating on sound economic policies, but Nigeria is bedeviled by bad leadership. Nigeria should notch up the lending rate by a moderate 1%, 14% looks too conservative for a struggling economy. Fifteen percent lending rate can close a lot of loophole for Nigeria at this period. As for inflation, Nigeria cannot sustain the staggering stagflation of over 18% for long. Overall the prognosis looks good, but the damper comes in the way of political instability in Nigeria. Once Nigeria gets a unifying leader the nation can be great. I believe it is possible for Osinbajo to pull it off if given the opportunity otherwise the clamor for secession and restructuring will continue until Nigeria hits the wall.

    • Wale

      “World recognized economist Dr Iweala” that came into a robust and growing ecnomy and left it in shambles.

      Well, Dele can carry his own water, you’ll likely read from him soon

      • 0tile

        Under whose watch was Nigeria recognized as Number One economy in Africa, under Abacha or Yar’Adua? Obasanjo made the wisest decision for Nigeria to give that model economist opportunity to serve Nigeria. Anybody denying this fact is denying reality.

        • Wale

          Your NOI herself said it in one of her paid interviews (US) that the recession started in 2013, two years before patriotic Nigerians kicked her and Jonathan to the curb.

          • 0tile

            You see, there is time for serious discussion and there is time for idle talk. You cannot prove a convincing point by these anecdotes of Dasuki said this, Oke said that, Banjo said this, Bala said that, she said this, he said that, such is uneducated. Nigerians are hurting economically, we don’t have time for idle talk now.

          • Wale

            @Otile have nice days, if you don’t believe that pointing fingers and naming accomplices in crime is a convincing point. I see why Nigeria is in it’s present predicament.

          • 0tile

            My brother, pointing fingers and naming names of opponents is not enough, it can be mere witch hunting. Also in politics nothing can be more unpardonable than the perceived wrong doing of the opponent. You have a good day.