The Central Bank of Nigeria (CBN) has advised deposit money banks (DMB) on aggressive response to the increase in the Monetary Policy Rate (MPR) to 13 percent from 12 percent as regards to lending to the economy.
The apex bank also warned that any bank caught in excessive spread in lending rates will be called to order.
Bayo Adelabu, deputy governor, corporate services, CBN, said this in response to the concern by House of Representatives’ members on the impact of the MPR hike on the common man.
“We expect banks not to respond aggressively to increase in MPR. Any bank making excessive spread will be called to order”, he said.
The House of Representatives’ committee on banking and currency led by Jones Chukwudi Onyereri, chairman, raised the concern on what MPR at 13 percent meant to the price of garri in the village while on oversight visit at the CBN Lagos branch.
Adelabu, who represented Godwin Emefiele, governor of CBN, explained that the adjustment in MPR and the Cash Reserve Requirement is the best the apex bank can do to address the issue of declining external reserves resulting from strong demand for foreign exchange and continued decline in oil price.
“The decision of the MPC was the best we could do under the circumstance the economy is presently. We noticed that a lot of things contributed to the pressure on the naira. Firstly, is the declining revenue from oil. Our source of revenue in this country is just oil and when oil price declined by about 25 percent in the last one month, we expected that there would be pressure on the foreign reserves. We believe that the pressure on the naira, apart from the declining oil prices is also as a result of liquidity in the banking industry whereby a lot of frivolous demands are being made by customers”, Adelabu said.
Onyereri said the CBN has not done very well in regulating the banking sector as they expected it to put a cap on interest rates on loans.
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However, the CBN has called Nigerians to be patriotic and patronise locally manufactured goods as a response to austerity measures.
“We are encouraging companies to go into local production. We can produce raw materials here instead of importing them”, he said.
Speaking on the status of the N220 billion Micro Small and Medium Enterprises Development Fund, the CBN deputy governor noted that Delta State government has launched into the fund accessing N2 billion to fund small businesses in the state. He explained that states are not going to ask for collateral to disburse the fund rather will provide guarantee.
