Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, has ruled out a cut in interest rate until inflation, which is currently at double digits now, drops to a single digit of nine per cent.
He told Bloomberg Television in an interview in London that the CBN was hopeful that Nigeria’s inflation rate would hit the single digit mark by 2020 and that was when the banking regulator would consider a rate cut.
He also charged the banking sector to live up to its core responsibility of stimulating the economy by advancing credit to the real sector to create jobs for Nigerians.
“How soon do I see interest rates coming down? I’m not seeing that coming this year,” Emefiele said in the interview with Bloomberg, “During the course of 2020 we may be able to see that, but I can’t see that until we begin to see the numbers showing inflation is trending downward.”
The central bank held the monetary policy rate at 13.5 per cent last week for the third straight meeting after surprising the market in March with the first cut since 2015.
While inflation has slowed from as high as 18.7 per cent in January 2017 to 11 per cent in August, it’s been outside the target band of 6 per cent to 9 per cent for more than four years.
“Unfortunately it’s been sticky coming downwards as soon as it hit about 11 per cent. “The Monetary Policy Committee would love to see it at about 9 per cent before beginning to aggressively thinking about easing,” Emefiele said.
He also said most of the banks have obeyed a directive to raise loan-to-deposit ratio to 60 per cent as directed by CBN and those that fail to do so will face penalties by October 1.
“Compliance level has been excellent. Not all the banks have complied, naturally. Sanctions will be administered by October 1,” he added.
The CBN had ordered banks to increase lending by late September in a bid to shore up an economy struggling to recover from a contraction in 2016, its first in a quarter of a century. The monetary authority wants to steer banks away from naira bonds, which offer hefty yields, and into consumer and corporate lending.