CBN Pegs Interest Rate at 14%

The the Monetary Policy Committee, MPC, of the Central Bank of Nigeria, CBN, on Tuesday, July 26, pegged interest rate at 14 per cent from 12 per cent to encourage savings and investment.

The CBN Governor, Godwin Emefiele, who addressed reporters at the end of the bi-monthly MPC meeting in Abuja yesterday said: “the MPC underscored the imperative of coordinated action, anchored by fiscal policy, to initiate recovery at the earliest time.”

Emefiele said the MPC advocated “for the urgent diversification of the economy away from oil to manufacturing, agriculture and services and called on all stakeholders to increase investment in growth stimulating and high employment elasticity sectors of the economy in order to lift the economy out of its current phase”.

According to him, the MPC recognised the weak macroeconomic environment, as reflected particularly in increasing inflationary pressure and contraction in real output growth.

He said members “call on the Federal Government to fast-track the implementation of the 2016 budget in order to stimulate economic activity to bridge the output gap and create employment”.

Members also agreed that the economy was passing through a difficult phase, dealing with critical supply gaps and underscored the imperative of carefully navigating the policy space to engender growth and ensure price stability. The MPC summarised the two policy options it was confronted with as restarting growth or fighting inflation.

The MPC expressed concern over non-payment of salaries in some states and urged express action in that direction to help stimulate aggregate demand.

The MPC restated its commitment to measures and deployment of relevant instruments within its purview to complement fiscal policy with a view to restarting growth.

The Committee also enjoined Deposit Money Banks (DMBs) to partner with the government and the CBN “by redirecting credit from low employment generating sectors to those capable of supporting growth, reducing unemployment and improving citizens’ standards of living”.