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EXTRA: Financial Analyst comments as CBN retains 13.5% interest rate in July



The Nigerian central bank’s monetary committee voted unanimously today to hold its benchmark interest rate at 13.5% because key macroeconomic indicators were “trending in the right direction”, Central Bank of Nigeria Governor, Mr. Godwin Emefiele said.

Most analysts polled by Reuters had predicted no change, though they said the Central Bank would probably ease in September.

The Central Bank also left the benchmark rate at 13.5% at its previous meeting in May after a surprise cut of 50 basis points in March.

Emefiele said that rate cut was part of an attempt to stimulate growth in Nigeria, Africa’s largest economy, and to signal a “new direction”.

Commenting on the CBN’s decision, FXTM Research Analyst, Lukman Otunuga, writes in an email to thus, “Persistent inflationary pressures in Nigeria have prevented the Central Bank of Nigeria (CBN) from joining the global monetary easing bandwagon this month.

“The CBN kept its benchmark interest rates unchanged at 13.5% in July as the central bank focused on price stability, even as economic growth remained important. Although a rate cut is in the pipeline, this will be heavily influenced by inflation which has been above the target range of 6%-9% for more than four years. With the pace of economic growth still fragile and the nation exposed to external risks in the form of Oil volatility, it becomes a matter of “when” rather than “if” the CBN will cut rates.

Lukman Otunuga

“Repeated signs of consumer prices cooling should provide the central bank with enough ammunition to pull the trigger on a rate cut in September. Given how lower interest rates will stimulate consumption, encourage businesses to boost investments and give banks more incentive to borrow, this could be one of the medicines Nigeria needs to restore lost strength”.

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