CBN holds benchmark interest rate at 14%

The Central Bank of Nigeria (CBN) has kept its main interest rate on hold at 14 percent to counter inflationary risk and introduced an initiative aimed at increasing liquidity to businesses.

Speaking after the two day Monetary Policy Committee (MPC) meeting held in Abuja, CBN Governor, Godwin Emefiele said the decision to hold the benchmark interest rate at a record high level of 14 percent, which it has maintained since July 2016, was made at a meeting of 10 members of the monetary policy committee.

“The committee decided by a vote of seven members to retain the monetary policy rate at 14 percent. Two members however voted to increase the MPR (monetary policy rate) by 50 basis points, one member voted to cut it by 25 basis points,” he said.

Nigeria, which is Africa’s biggest crude producer, emerged from its first recession in 25 years in 2017. The central bank is looking for ways to boost credit to the economy while keep a lid on inflation so as not to stifle growth.

Emefiele said the bank would encourage large companies to issue commercial paper at lower yields and would consider releasing funds to banks that lend to businesses at single digit rates.

“In order to achieve the objective of lowering interest rates we would encourage large corporates to issue commercial paper notes in the market,” he said.

The central bank, worried about the liquidity injection from the government’s recently approved 2018 budget, said it could invest in commercial paper issued by companies to create jobs.

The central bank governor said the monetary policy committee expressed concern that credit to the real economy was falling and there was a need to incentivise deposit money banks to increase credit.