Banks go for higher interest rate, shun naira devaluation - CBN
The Central Bank of Nigeria (CBN) has stated that the Chief Executive Officers (CEOs) of banks in the country have indicated their preference for high interest rate rather than the devaluation of the naira.
The CBN Governor, Lamido Sanusi, represented by Director, Credit Risk Management, Kemi Fatobi , disclosed this at the 13TH Annual General Meeting (AGM)/ National Conference of Risk Managers Association of Nigeria (RMAN) held in Lagos.
According to Sanusi, 'when we asked the CEOs of banks at the Bankers' Committee Meeting, which of these two instruments - higher interest rate and currency devaluation - that they would like to be initiated by the CBN, most of the CEOs said high interest rate.' While responding to why the CBN does not want to reduce the Monetary Policy Rate (MPR), he said that the apex bank was extremely committed to defending the economy.
In defence of high interest rates, Sanusi told the risk managers that there was no empirical evidence so far in the Nigerian context, that lowering interests would boost the kind of lending that is hoped for, especially for real sector growth.
According to him, 'The CBN has continued to maintain a tight monetary stance. In November, it kept the benchmark lending rate for the seventh consecutive time on hold at 12 per cent, with a corridor of +/- 200 basis points around the midpoint; retaining the Cash Reserve Ratio (CRR) at 12.0 per cent and the Liquidity Ratio at 30 per cent.
Continuing, the CBN Governor said, 'The tightening measures were adopted to defend the naira, create price stability and build reserves. The hazards of lowering the rate at this time are much weightier than the gains thereof.'
Sanusi also disclosed that the banking system was working towards setting up a unified or single biometric data base, which would enable every single bank in Nigeria to have records of every banking customer.