Business
CBN retains interest rate at 11 per cent
By Ali Smart
The Monetary Policy Committee of the Central Bank of Nigeria (CBN) has retained the Monetary Policy Rate at 11 per cent during its meeting in Abuja on Tuesday.
Governor of the CBN, Godwin Emile disclosed this while speaking with reporters after the meeting, adding that members of the Committee voted to retain the Monetary Policy Rate (MPR), Cash Reserve Requirement (CRR), Liquidity Ratio (LR) and the asymmetric corridor of +2/-7 around the MPR.
“The MPC voted to retain the CRR at 20.0 per cent; MPR at 11.0 per cent; Liquidity Ratio at 30 per cent; the asymmetric corridor at +200 basis points and -700 basis points.”
The CBN givernor was however quick to add that the apex bank cannot force interest rates on banks. “When moral persuasion fails, CBN cannot regulate interest rate; we cannot force them, all we can do is to put in place policies that will enable them to do what we want. We can continue to incentivise them also by putting in place policies that will encourage them to do this. This is a free market, we cannot really compel them as is expected. Until banks decide to work with the CBN, those funds sitting in the CBN vault will not be made available to them.”
Read also: Analysis: Why CBN caved in on forex restrictions
The CBN governor also stated that the bank has set machinery in motion to assist the Federal Government to restructure its borrowing, adding that “the Committee stressed the need for the fiscal authorities to compliment the Bank’s low interest rate policy orientation by properly coordinating its borrowing activities (and rates) with the Bank in order to push the common objective of stimulating banking system credit delivery at low interest rates to the key sectors of the Nigerian economy. It noted that given the current economic reality of dwindling oil revenue and the rather unclear outlook for commodity prices, there would be need for a recalibration of the fiscal strategy to increasingly explore opportunities in non-oil tax revenue.”
On the devaluation of the Naira and the fall in the price of crude oil, the CBN governor said the CBN is already working on different scenarios. “The models are being worked on and we will look at them as much as possible and we will continue to discuss at management levels and we will try as much as possible to continue to share our thoughts with the fiscal authorities with the view to harmonising the positions to ensure that notwithstanding the drop in crude prices, that we are able to continue to run the government and continue to do business.”
On the suspension of sale of forex to Bureau De Change (BDC) operators, the CBN governor said the BDC is not a very important market and that the volume of their involbement in the forex market is insignificant at about 5-10%.
“It is high time we all realised and agree that government cannot continue to provide foreign exchange to support the need of that market. The Central Bank will continue to work with them because they continue to remain licensed under the CBN. We will try to see how we can assist them to deepen activities in that market and then they can source forex just like we suggested from the autonomous market.”
On the introduction of the N50 stamp duty, Emefiele said it became inevitable.
“Stamp duty is one option; the numbers are there in the budget about what we expect to generate from stamp duties in 2016, we will try as much as possible in working with the banks to ensure that all transactions are captured in a way that will ensure that every transaction that is carried out get debited for N50. We have not dimensioned it yet but in due course, Nigerians will begin to know what this will translate into. It will be designed to help the activities of government to improve its revenue.”
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