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CBN may slash interest rate on growing GDP rate

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8 years ago

March 7, 2017

Olu Emmanuel

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By Chioma Obinagwam

The Central Bank of Nigeria(CBN) may cut down interest rate, owing to the improvement, though marginal of the country’s Gross Domestic Product.

Dr. Uche Uwaleke, Head of Department(HOD), Banking and Finance Department at Nasarawa State University disclosed this at a seminar organised by the CBN in Sokoto, recently.

However, recent reports by the National Bureau of Statistics(NBS), Nigeria’s real Gross Domestic Product (GDP) growth rate tilted northward to -1.30 per cent in the fourth quarter of last year (Q4 2016) compared to -2.26 per cent in the previous quarter.

Interest Rate is defined as the proportion of an amount loaned which a lender charges as interest to the borrower whereas GDP represents the monetary value of all the finished goods and services produced within a country’s borders in a specific time period; one of the primary indicators used to gauge the health of a country’s economy.

Uwaleke is optimistic that a reduced interest rate, which is usually the outcome of a decline in Monetary Policy Rate(MPR), would form the crux of deliberations at the forthcoming Monetary Policy Commitee(MPC) meeting.

Monetary policy consists of the actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates.

The Banking and Finance guru, who spoke on the theme, ‘Enhancing Domestic Production as a Panacea for growth and Foreign Exchange Conservation’ added that the GDP would most likely improve further in the positive direction in the forthcoming months.

“I see interest rates coming down in 2017. Given that the GDP figure has adjusted to -1.30 per cent, compared to -2.26 per cent in the previous quarter. If doesn’t happen in February, it will definitely happen in March,” he said.

This prediction is coming as the CBN is warming up for its next MPC meeting slated for March this year.

Nigeria’s MPR is currently at 14 per cent, the benchmark rate at which banks in the country fix their interest rate.