Articles

Sanusi: CBN Not in Hurry to Relax Monetary Policy

12 Feb 2013

Views: 2,340

Font Size: a / A

211112F3.Lamido-Sanusi.jpg - 211112F3.Lamido-Sanusi.jpg

CBN Governor, Mallam Sanusi Lamido Sanusi

Obinna Chima and Nume Horsfall
 
Notwithstanding the argument for the Central Bank of Nigeria (CBN) to relax the tight monetary policy that has been in place since 2011, the bank Monday said it would not bow to pressure from members of the public.

In fact, the CBN Governor, Mallam Sanusi Lamido Sanusi, who said this at the 4th annual investors’ forum organised by Renaissance Capital (RenCap), insisted that the apex bank was not in a hurry to loosen its stance on monetary policy, citing the need to ensure economic stability.
He explained that the banking sector watchdog did not want to send a signal that the restrictive monetary policy regime was over by lowering interest rate.

The CBN’s Monetary Policy Committee (MPC) which determines interest rate has in the past one year, kept the Monetary Policy Rate (MPR) at 12 per cent, which some analysts, manufacturers and industrialists believed was not favourable to them.

Also the Cash Reserve Requirement (CRR) and the Liquidity Ratio are currently at 12 per cent and 30 per cent respectively.

Sanusi explained: “Since the last three MPC meetings, there has been this orchestrated attempt in the run up to the MPC to intimidate and harass us into lowering interest rate. As I explain to people, it is very easy to take stability for granted. Why we are no longer dealing with banking system that was on the verge of collapse, external reserves that was crashing, with multiple exchange rates, with inflation at 15 per cent, it is nice for people to be complaining whether interest rate should be 50 basis points or 100 basis points lower.

“No, we are not going to take stability for granted. The message is that we are not in a hurry to loosen interest rate until we are satisfied that there will be no risk to stability. We are not in a hurry to send a signal that a tightening policy is over, only to turn around at the next MPC and raise interest rate. So, we have chosen to stay on the side of caution so that people would manage their expectations.”

Continuing, Sanusi said the MPC did not react “because of what we are told in the newspapers to do,” adding that “the crescendo will probably continue and we are cautious obviously on the impact of high rate on those borrowers that have access to credit.”

He however disagreed with the allusion that the high rate of interest was the major reason why companies did not have access to credit. This, he blamed on the structural imbalance in the economy.

“You can’t lend to a manufacturer who does not have electricity, if without electricity, his business will not thrive. Low interest cannot compensate for bad infrastructure, low interest rate will not compensate for uncompetitive labour. So, we have to continue to address the structural issues for us to have access to credit.

“Some of the slowdown you saw in Gross Domestic Product (GDP) was as a result of structural issues and not as a result of the tightening. That basically is it. Monetary policy is now very boring and that is how it should be. Monetary policy should be boring, everything shouldn’t be about banks,” the regulator said.

Tags: Business, Nigeria, Featured, Sanusi, CBN, Monetary Policy

Comments: 0

Rating: 

 (0)
Add your comment

Please leave your comment below. Your name will appear next to your comment. We'll also keep you updated by email whenever someone else comments on this page. Your comment will appear on this page once it has been approved by a moderator.

comments powered by Disqus