Why CBN is right in retaining benchmark interest rate — Gwadabe
The president of the Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, on Wednesday defended the CBN’s retention of the benchmark interest rate and other monetary policy parameters.
The CBN’s Monetary Policy Committee (MPC) met on Tuesday and retained the Benchmark interest rates at 14 per cent, alongside other monetary policy parameters.
Gwadabe told the News Agency of Nigeria (NAN) that “the CBN for now cannot adjust their rates either way, considering the relative stability achieved so far from monetary policies.
The financial expert noted that monetary policies alone were not sufficient in achieving the economy of our dream, adding that a blend of fiscal and monetary policies were required.
Gwadabe said that increasing the nation’s fiscal buffers from increasing oil prices and infrastructural spending were needed to further consolidate the gains recorded in the economy.
According to him, enhancing micro finance lending and running a growth-driven fiscal policy are essential to reposition a post-recession economy for growth and development.
The News Agency of Nigeria (NAN) reports that the CBN rose from its 115th MPC meeting retaining the benchmark interest rate at 14 per cent, alongside other monetary policy parameters.
Mr Godwin Emefiele, Governor of the CBN, said that reducing interest rates may reverse the gains achieved in exchange rate stability and inflation rate reduction.
“On the argument to hold rates, the Committee believes that the effects of fiscal policy actions towards stimulating the economy have begun to manifest as evident in the exit of the economy from the 15-month recession.
“Although still fragile, the fragility of the growth makes it imperative to allow more time to make appropriate complementary policy decisions to strengthen the recovery.
“Secondly, the Committee was of the view that economic activity would become clearer between now and the first quarter of 2018, when growth is expected to have sufficiently strengthened and gains in receding inflation, very obvious.
The most compelling argument for a hold was to achieve more clarity in the evolution of key macroeconomic indicators, including budget implementation, economic recovery, exchange rate, inflation and employment generation,’’ Emefiele said.
NAN further reports that the economy had been showing signs of real growth since it exited recession a couple of weeks ago.
The increase in the nation’s foreign reserve to 33 billion dollars and the steady reduction in the inflation rate are signs of a growing economy.
The stability in the foreign exchange market was borne out of a series of aggressive interventions by the CBN in rescuing the Naira from the jaws of currency speculators and hoarders.
The CBN has injected over 3.6 billion dollars in a series of interventions at the FOREX market, thus narrowing the gap between the official and parallel market rates.