CBN raises interest rate to 14%, canvasses for diversification of economy

Rising from its 2-day meeting on Tuesday, the Central Bank of Nigeria’s Monetary Policy Committee increased interest rate to 14 per cent from the previous 12 per cent.

Addressing media after the bi-monthly meeting, CBN Governor, Godwin Emefiele said the MPC recognised the weak macroeconomic environment, as reflected particularly in increasing inflationary pressure and contraction in real output growth.

“The MPC underscored the imperative of coordinated action, anchored by fiscal policy, to initiate recovery at the earliest time.”

Emefiele said the MPC advocated “for the urgent diversification of the economy away from oil to manufacturing, agriculture and services and called on all stakeholders to increase investment in growth stimulating and high employment elasticity sectors of the economy in order to lift the economy out of its current phase”.

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He said members “call on the Federal Government to fast-track the implementation of the 2016 budget in order to stimulate economic activity to bridge the output gap and create employment”.

Members also agreed that the economy was passing through a difficult phase, dealing with critical supply gaps and underscored the imperative of carefully navigating the policy space to engender growth and ensure price stability. The MPC summarised the two policy options it was confronted with as restarting growth or fighting inflation.

The Committee expressed concern over non-payment of salaries in some states and urged express action in that direction to help stimulate aggregate demand. It also restated its commitment to measures and deployment of relevant instruments within its purview to complement fiscal policy with a view to restarting growth.

The MPCC also enjoined Deposit Money Banks (DMBs) to partner with the government and the CBN “by redirecting credit from low employment generating sectors to those capable of supporting growth, reducing unemployment and improving citizens’ standards of living”.

The MPC offered to work with the fiscal authorities to quickly mitigate the economic pains in the country, particularly the discomfort of inflation.