The Central Bank of Nigeria (CBN) on Thursday hinted of the possibility to reduce the Monetary Policy Rate (MPR) following the drop in inflation rate for 17th consecutive months.
Ahmed Abdullahi, CBN’s director, banking and supervision said this at the end of the bankers committee meeting in Lagos.
Nigeria’s inflation rate dropped marginally to 11.14 percent in July from 11.23 percent the previous month, but still remains well above the 6-9 percent preferred band.
“Market expectation was that because of the 17 months of drop in inflation, there would be a reduction in MPR. The concern MPC has regarding capital reversals and exchange rate stability that was why we see MPC holding the rates”, Abdullahi said.
On the issue of Cash Reserve Ratio (CRR) he said the CBN the can refund the CRR of a bank that has engaged in lending in a new project or an existing one in the agriculture or manufacturing sector as a way of utilising the CRR, adding that the CBN will release the guideline soon.
“So anytime a bank lends to manufacturing or agriculture at the rate the CBN has prescribed, it would have its CRR refunded up to the amount it has lent. The guidelines are coming up any moment from now and once they do it take off”.
Other banks chief executives who address the media after the meeting are Segun Agbaje managing director of Guaranty Trust Bank and Yemisi Edun executive director, finance, FCMB.
Agbaje said there is commercial paper or bonds that would be issued and that the guidelines would come out very soon.
The aim of this he said aim is in two folds to stimulate certain sectors which would start with agriculture and manufacturing. More so it would allow people to do capital expenditure (CAPEX) which is more long term, and single digit interest rate loans where bonds could go as far as 10 years.
“It would probably be the first time in the history of this country where manufacturers would be able to take fixed interest rate loans for 7 years which means they would be able to plan. The volatility that they fear for all kinds of risks would be taken out and I think these are very laudable steps in improving and growing the economy”, he said.
According to Edun, the CRR that is taken from banks would be positively deployed to grow the real sector as well as the agriculture sector in the economy. This is very positive for the economy and also positive for banks because we would be able to access these funds and earn on it. And because it would be coming at single digit rate, it would be positive for the economy.
“For now, it would be channelled to agric sector and manufacturing but it for growth expansions enhance creation of jobs. the focus it ensure the economy grow now that we have achieved stability we need to now see a positive trend of growth and that is what we are committed to do at this time”, she said.
HOPE MOSES-ASHIKE
