CBN to pursue gradual reduction in interest rates – Emefiele

The Central Bank Governor (CBN), Mr Godwin Emefiele, on Thursday assured Nigerians that the apex bank would focus on gradual reduction in interest rates under his leadership.

Emefiele gave the assurance at a news conference to outline his policy focus as the new CBN Governor in Abuja.

The News Agency of Nigeria (NAN) reports that Emefiele who assumed office on Tuesday is the 11th CBN Governor.

He replaced the former Governor, Malam Sanusi Lamido Sanusi, who was suspended from Office by the president before the expiration of his tenure.

“We shall pursue a gradual reduction in interest rates.

“A comparison of selected macro-economic aggregates from some emerging market countries, including South Africa, Brazil, India, China, Turkey and Malaysia indicate that Nigeria has one of the highest Treasury Bill rates.

“Such high rates creates preserved incentives for commercial banks to simply buy virtually risk-free government bonds rather than lend to real sector,’’ he said .

He said that to enhance financial access and reduce the cost of borrowing credit, there was the need to pursue policies targeted at making Nigeria’s Treasury Bill rate more comparative to other emerging markets.

Emefiele said that while reduction in both deposit rates would encourage investment attitude in savers, a reduction in lending rates would make credit cheaper for potential investors.

“The bank will also begin to include unemployment rates as one of the key variables considered for its monetary policy decisions.

“In the interim, we will continue to maintain a monetary policy stance, reflecting the liquidity conditions in the economy as well as the potential fiscal expansion in the run-up to the 2015 general elections,’’ he said.

On the exchange rate policy, he said the key goal would be to maintain exchange rate stability in view of the high import dependent nature of the economy and the significant exchange rate it passed through in recent years.

According to him, a systematic depreciation of the Naira would literarily translate to considerable inflationary pressure with attendant effect on macro-economic stability.

“Therefore, under my leadership, the bank will continue to focus on maintaining exchange rate stability and preserve the value of the domestic currency.

“We will sustain the managed float regime in the management of the exchange rate as this will allow the bank to intervene when necessary to offset pressure on the exchange rate.

“To support this strategy, we will strive to build-up and maintain a healthy external reserve position and ensure external balance,’’ Emefiele said.

The new CBN governor explained that there was no doubt that reducing the interest rate and maintaining the exchange rate was a daunting twin goal.

“In this pursuit, the bank will work with all stakeholders to device measures to ensure the goals are achieved.”

On Financial System Stability, he said the bank would continue to sustain the effective management of the potential threats and avoid systemic crisis.

“The core of my vision is to effectively manage potential threats to financial stability and create a strong governance regime that is conducive for financial intermediation, innovative finance and inclusiveness.

“In this regard, we hope to anchor on two pillars of management factors that create liquidity shocks and zero tolerance on practice that undermine the health of financial institutions,’’ he said.

To achieve the goal, Emefiele said the bank would work with stakeholders to aggressively shore up the reserve and also engage both the fiscal and political authorities.

He assured Nigerians of enhanced banking supervisory purview over the banking system and strengthening of risk-based supervision mechanism to ensure overall health and banking system stability.

Emefiele said he would create a Central Bank that is professional, apolitical, people focused and a bank that would dissipate its energies on building a resilient financial system to serve growth and development needs of Nigerians. (NAN)

2 Comments

1. 

   Josiah A. Ilori

   June 5, 2014 at 11:37 pm

   I took time to read and analyze the new Central Bank of Nigeria Governor’s approach to stabilizing the financial sectors of the economy and his coherent approach in bringing equitable results to the economy as a whole. Mr. Emefiele appears to know the core of Nigeria’s financial problems. His qualifications and experience in banking and financial institutions no doubt, are added accolade to his determination to enhance the position of the apex bank to international standard. A thorough analysis of Mr. Emefiele’s background evince an unassuming executive whose aims and objectives are to bring the lost glory of the CBN back to what it was supposed to be. My advise is for him to stay clear of politics, tribalism, nepotism, corruption and what have you! I trust the new CBN Governor for he has a lot of Nigerians monitoring his ability to move the apex bank forward. The issue of unemployment should be seriously considered by him so that his administration will give priority to industrial revolution in the country. That brings me to the sensitive position of interest rates and inflation. These two factors, if effectively controlled, will enhance the position of naira. The Governor has torched practically everything that will move the country forward in the realization of its projected 2020 vision plan! The country may not achieve it as originally planned, but the vision of Mr. Emefiele will move the economy closer to its original plan. Lastly, I would appeal to every progressive Nigerians to rally round the new Governor for he has a mountain of obstacles to overcome! I am happy that he will not be alone for he has capable hands to help him do the tedious jobs ahead of him. May his tenure bring the much desired goals and objectives of the country to success.
2. 

   kelvin

   June 7, 2014 at 6:13 am

   Mr Emefiele, this idea of yours is laudable, fabulous and wonderful, it shows u really know the problem of this country. my advice 4 u is to surround yourself with the right people, and avoid politics.