CBN withdraws N410b from circulation, interbank rates hit 20%
Expert urges action on 2016 Budget
Not less than N409.7 billion has been withdrawn from circulation, with the interbank lending rates rising to 20 per cent, as the four-month-old monetary policy easing by the Central Bank of Nigeria (CBN) ends.
Nigerian banks, in an effort to meet the obligation for the new CRR requirement, scrambled for available cash in the money market, thereby causing rise in the Open Buy-Back (OBB) and Overnight rates to 20 per cent from 6.75 per cent and 7.33 per cent in the middle of the week.
Specifically, the Monetary Policy Committee of the CBN had last week raised the benchmark interest rate, also known as the Monetary Policy Rate (MPR), to 12 per cent from 11 per cent; Cash Reserve Ratio (CRR) for commercial banks to 22.5 per cent from 20 per cent, but held the liquidity ratio steady at 30 per cent. It also increased the Standing Deposit Rate for banks to seven per cent from four per cent and pegged its Standing Lending Rate for banks at 14 per cent from 13 per cent, all in efforts to mop-up more naira available for lending.
The decisions simply mean that the quantity of money in circulation is effectively reduced, together with liquidity in banks’ possession, and this consequently tightened the credit expansion opportunities.
On the other hand, the upward adjustment by the Monetary Policy Rate (MPR) by one per cent would serve as compensation to investors for lowered real returns occasioned by inflation, as well as attract foreign private capital into the country.
However, analysts said that the decision to move up by 2.5 per cent from 20 per cent, after it was reduced from 25 per cent four months ago, showed that the operating environment has remained unattractive for loan growth.
Meanwhile, a fiscal governance expert and Lead Director of Centre for Social Justice, Eze Onyekpere, has said that while the passage of the federal budget by the National Assembly members is commendable, it should be noted that the provisions of the law state that this harmonised Federal Appropriation Bill for a new year should be assented to by the President on or before the clock ticks 11.59pm on December 31.
“Already, we have lost three months and no one is sure whether Mr. President will not have some misgivings to delay the signing and thereby return the Bill to the NASS for further re-touching,” he said.
According to him, what is available to Nigerians at the moment is the lump sum of the overall budget and its division into sub-heads of expenditure like recurrent non-debt, capital, statutory transfers and debt service, raising the alarm that there is always a mischief in the nation’s budget details.
Noting the country’s notoriety in poor budget implementation, the fiscal governance expert said Nigerians expect the President to immediately assent to the bill and move the executive to expeditiously start the implementation of the budget, which must be implemented to the letter.
“We are expectants of improvements in livelihoods, infrastructure, social services, employment, economic growth and raising the dignity of Nigerians. The time for apologies is over,” he said.
No Comments yet