CBN keeps benchmark interest rates at 14%, calls for complementary fiscal measures

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TUE, JANUARY 24 2017-The Central bank of Nigeria (CBN) held the benchmark interest rate at 14 percent on Tuesday, and kept its cash reserve ratios for commercial banks at 22.5 percent. The rate decision matched the views of many economists including economists at the Access Bank Intelligence unit.

The decision comes after two days of deliberations by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria.

Major highlights of the meeting include the retention of asymmetric corridor of +200 basis points and -500 basis. Liquidity Ratio was equally left untouched at 30% while nothing new was said of the foreign exchange policy which has for several months now baffled economists.

The rate policy has been knocked severally at different quarters as just another statement since the monetary policy decisions has never been supported by any reasonable fiscal measures.

The CBN Governor Godwin Emefiele echoed this sentiment in announcing the MPC today and wished that the federal government would begin to evolve what he called robust fiscal policies in reviving the economy and the investment environment which is still very cloudy.

The disconnect between these two measures often means that all rates policies provides less than optimal result because the rates in the first place (CBN Vs Commercial Banks) don’t recognize each other.

The retention of the rates also has come under scrutiny since returns has stayed largely negative on the existing rates since July 2016 when it was first taken to 14%. Many had equally anticipated a slight rate hike but close sources say that was ruled out instantly because of its potential to signal unbearable commercial bank rate.

 

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