CBN targets 11% inflation in 2017, to raise interventions for Agric, manufacturing 

Nigeria’s Central Bank targets to bring inflation down to between 10 and 11 percent by year end as citizens battle high consumer prices, coupled with diminishing purchasing power and their attending impact on the economy.

Speaking on Tuesday at a one-day round-table in Abuja to address increasing interest rates in Nigeria, governor Godwin Emefiele said the CBN was concerned about high consumer prices and was looking at some drastic measures to further drive rates as well as inflation down.

The CBN had set an inflation 6-9 percent band, but consumer prices -year-on year- had more than doubled that figure particularity since last year as the country slipped into recession.

Headline inflation (year-on-year) though, moderating for the third consecutive month, fell to 17.24 per cent in April, from 17.26 per cent in March, 17.78 per cent in February and 18.72 per cent  in January 2017, effectively reversing the monthly upward momentum since January, 2016.

Though the CBN welcomes the downward trend in inflation, it is highly concerned that the rate was still significantly above the policy reference band.

Speaking at the session, Emefiele assured of apex bank’s commitment to bringing inflation down and especially intervene more in Agriculture and manufacturing sectors at a maximum nine percent interest rate.

Emefiele said Banks are making plans to expand lending and have already contributed up to N27 billion to the pool of funds they decided in February, to set aside annually for exports.

Nigerian Banks had in February agreed to dedicate five percent of their annual profit-less tax balances as equity capital for export driven businesses as well as those which commit to helping government’s import substitution drive.

The funding support will not be disbursed as ‘loans’, but will allow each bank take up an equity holding in the scheme based on its annual contribution from annual profit.

The governor said the CBN is now working out an engagement with the banks on how to lend these funds and others dedicated to the SMEs.

He added that the in the interim, the CBN is considering ‘partitioning’ the loan portfolio of banks pending when inflation trends down, while also assuring that those interventions will continue inorder to meet inflation and rate targets.

Senate President Bukola Saraki who also spoke at the event called for low interest rates to support Small and Medium scale Enterprises ((SMEs).

He said that unless there is a deliberate policy framework for Nigeria’s monetary policy regime to support small businesses, there will be no meaningful growth in the country.

This is even as industry experts at the meeting lamented that rising bank credit to government at the detriment of the private sector could undermine economic growth and job creation as Nigeria battles to exit its worst economic recession in 29 years.

Saraki expressed concern that the current regime of high interest rate has hampered investments in Nigeria, while calling for a new interest rate regime that supports enterprise development in the country.

He called for deliberate policy to frame the country’s monetary policy regime towards support for small businesses.

“It will be profoundly improbable to genuine businesses like agriculture, production and solid minerals to survive on interest rate regime of 30%.

“Let’s give a chance to our poultry and cassava farmers, welders, builders, our fashion designers, filmmakers, shoemakers, furniture companies and our other numerous small and medium sized industries a chance to stay alive and make a living for their families. These people; the SME’s are the reason we are gathered here. These entrepreneurs employ 88% of our work force. They have demanded and we should find a means to give them a new interest rate. If we don’t, we will all be poorer for it. If we are able to, we will all ultimately benefit”, Saraki stated while declaring the event open on Tuesday.

Saraki said the upper legislative chamber is expanding access to finance and reviewing market rules to meet global best practices through legislative actions.

“All these legislative actions we are taking is rooted in our belief that if we are to attract more investments, add more jobs in the market, promote business development and widen the range of possibilities and opportunities for our teeming youthful population, a demographic advantage we are yet to fully explore, we must create the right legal regulatory and institutional frameworks that is enabling in a free market,” he stated.

In his remarks, Chairman, Senate Committee on Banking, Insurance and other Financial Institutions Rafiu Ibrahim said despite all the negative indices, banks continue to declare huge earnings, which as of 31st March 2017 increased significantly by 151.02 percent, while Profit Before Tax stood at N186.155 trillion as against N74.160 trillion in December 2016.

He advised the CBN and commercial banks to adopt strategies that will lead to reduction on lending rates in the short to medium term.

“The current regime of high interest rate continues to place a major burden on business investments and household consumption spending in Nigeria, thereby negatively impacting on the survival of Nigerian businesses.

“This is perpetuating the indicator which shows that only about 3% of SMEs starting up in the Country having access to credits from banks which ironically employ about 88% of our work force and therefore the backbone of the economy,” Ibrahim said.