Sanusi commends CBN on interest rates

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Emir Of Kano Muhammed Sanusi

The Emir of Kano, His Highness Muhammadu Sanusi, has thrown his weight behind the Central Bank of Nigeria, CBN, over a major policy disagreement with the Finance Minister, Kemi Adeosun, on interest rate.

The Finance Minister had advised the apex bank Monetary Policy Committee, MPC, meeting held Monday and Tuesday, to reduce interest rate by lowering its Monetary Policy Rate, MPR, from the present 14 per cent, to encourage investment and reflate the economy.

But the MPC, which is the highest policy making body of CBN, chose to retain the policy rate in a unanimous vote by members on Tuesday. Sanusi, a former governor of the CBN, said he supported the MPC decision on the grounds that it underpinned the autonomy of the apex bank.

In a reaction, he stated that he was actually worried about the Finance Minister position and was also afraid that the apex bank might succumb to the minister, but that he was greatly relieved when the apex bank decision was announced. The emir said this at the launch of the Nigerian Banking Report 2016 by Afrinvest West Africa Limited titled: Search for Investor Confidence in Lagos.

Sanusi said: “To be honest, when the fiscal authorities and many people in the private sector said they wanted a lower interest rate, I was concerned that the central bank would succumb to pressure. The fact that the central bank did not, shows that the central bank is beginning to reclaim its independence, which to me is a very good thing.

“I was very pleased with the MPC. In fact, I was waiting for the outcome of the meeting. When the central bank said they are not bringing the interest rate down, then I said yes that is what I like to see. These are economic issues and you make choices. As an interested party and a former central banker, I can see why the central bank was not willing to reduce the interest rate at this point in time. If you lower the MPR by 100 or 200 basis points (bps), it is not going to lead to a rapid increase in credit growth. You will not see an increase in credit growth that would reverse the downward trend in output by lowering MPR by 100 or 200 bps. You would however further fuel inflation and you would reduce the yields on fixed income securities at a time when you are trying to attract foreign exchange.

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