Don't Miss


Home   >   Business   >   Industries   >   Economy   >   CBN increases lending rate to 9.25 per cent

CBN increases lending rate to 9.25 per cent

By on September 20, 2011

The Central Bank of Nigeria yesterday increased the benchmark lending rate by 50 basis points from 8.75 per cent to 9.25 per cent.

The anticipated one per cent reduction in government’s recurrent expenditure in the annual budget, the bank said, was not enough to curtail the country’s inflationary pressure.

The decision on raising the MPR was taken to proactively tighten the huge injection of liquidity in the fourth quarter arising from the new N18, 000 minimum wage to public servants.

It is also meant to curtail the huge injection of N3trillion into the rescued banks by the Asset Management Corporation of Nigeria (AMCON) as well as the need to have real interest rate.

These factors, according to CBN governor Mr. Sanusi Lamido Sanusi, had made inflation outlook in the near to medium term uncertain.

The decisions were the highpoints of a two-day meeting of the Monetary Policy Committee held at the apex bank’s headquarters in Abuja.

This is the fifth time the apex bank would be raising the benchmark rate this year. It had, on January 25, raised the MPR by 25 basis points from 6.25 per cent to 6.50 per cent. Similarly, on March 22, in a bid to reduce public spending ahead of the April general elections, it increased the anchor lending rate by 200 basis points from 5.5 per cent to 7.5 per cent.

In the same vein, on May 24, it raised the MPR by 50 basis points from 7.5 per cent to 8 per cent to enable it address inflationary expectations associated with excessive liquidity, while on July 26 it raised the MPR by 75 basis points to 8.75 per cent.
Sanusi, who addressed journalists shortly after the meeting, said the move would help to correct negative interest rate situation in the market.

Given that the current oil price level may not be sustained in the event of a slowdown in global economic recovery, he said, the committee reiterated the need to pursue policies that would foster macro-economic stability and economic diversification as well as encourage foreign capital inflows.
The apex bank boss pointed out that the decision to increase the MPR was a popular one as eight out of the 12 members of the committee voted in favour of monetary tightening.

Explaining the voting pattern, he said that while seven members voted for a 50 basis point increase in MPR from 8.75 per cent to 9.25 per cent, three voted that the MPR be retained at the current rate, and one voted for a 100 basis point increase in MPR.

The CBN governor also maintained his ground on the deregulation policy, stressing that the apex bank had always advocated for the removal of oil subsidies.

He said: “The committee considered that, given the difficult and uncertain international environment, it is important to ensure that the current trends in growth are sustained and price stability is maintained. The recent data on inflation showed that the headline inflation rate had been maintained within single digit for the consecutive months. However, concerns remain about sustaining the present inflation trend.

On progress so far made by the rescued banks in the effort to recapitalise and meet the September 30 deadline, he said, “The committee was informed that five of the remaining banks were on the go.”

Leadership