…no cuts on interest rates – CBN

The Central Bank of Nigeria is currently not positively disposed to cut interest rates in the country, due to the need to ensure greater stability in the nation's financial system.

Speaking on the issue of high interest rates Wednesday, during an interactive session with members of the House of Representatives Committee on Banking and currency, CBN Governor, Mallam Sanusi Lamido Sanusi,  said the CBN is constrained by the CBN Act, which clearly limit its duties to the delivery of price stability, protection of the external value of the currency, management of the country's reserves and ensuring financial stability.

Saying the CBN has put in place several monetary measures to ensure stability in the economy, he said the delivery of low interest rates is not feasible due to the harsh business environment in the country.

He argued: 'How low do you have to bring down interest rates for banks to lend to a manufacturer that does not have power or for a bank to lend to a company that operates in an environment that does not have security, or where there is no infrastructure, at what rate of interest would a bank loan to a tomatoes farmer who is going to lose 50 per cent of his outfit between the farm and the market because there is no investment in storage facilities or cold rooms. These problems are infrastructure.

'It is not about moving interest rate down or up. Most of the Small and Medium scale Enterprises (SMEs) that do not have access to credits do not have access to credit because the environment does not allow businesses to thrive.'

'The likelihood of the interest rate coming down in the current environment is very low, in fact there is a higher likelihood of interest rate going up than coming down because we cannot afford to reverse all the gains we have had on stability.

'Obviously as we get improvement in the fiscal policy, the government borrows less and the rate of government bonds comes down, we can see a moderation in the lending rates. But if the government is borrowing money at 13, 14 per cent, funds a huge fiscal deficit, the private sector would have to pay even higher rate of interest rate.'