The Central Bank of Nigeria (CBN), the country’s apex bank, is expected to retain interest rate at 14 percent as the Monetary Policy Committee meeting begins today.
The two-day meeting usually brings together members of the MPC, who will meet for the 257th time to deliberate on monetary policy issues and vote on fixing a new Monetary Policy Rate (MPR).
The MPC has mantained a rather stable interest over the past year, with the CBN looking rather to find an economic equilibrium by mopping up liquidity through regular treasury bills offer while sustaining foreign exchange supply to an import-dependent economy.
In a lecture delivered over the weekend by the CBN Governor, Godwin Emefiele, titled: “The Dilemma of Monetary Policy and Exchange Rate Management in a Recession: Potential Options for Nigeria,” at the Second Homecoming series of the Economics Department of the University of Nigeria, Nsukka (UNN), it seems the MPC will look to maintain this trend.
During the lecture, Emefiele disagreed with those calling for a cut in interest rate, noting that it is not in the immediate interest of the economy. “Interest rates reflect not just the cost of capital but also the cost of doing business, and so we need to also look at interest rates from the perspective of the lender.
“Given that most banks have to individually provide security, power, and other infrastructure, it is not surprising that some of these costs are passed on to customers in the form of high-interest rates,” he explained.
The CBN Governor attributed the current economic challenges to factors such as weakened oil prices, poor productivity locally and the inability of commercial banks to invest the country’s real sector.
These challenges, according to him, prompted the CBN to fashion out an appropriate exchange rate strategy to achieve price and financial system stability and restart growth, read a report from ThisDay newspaper.