There had been calls by fiscal authorities on the CBN to lower interest rates in the country.
Addressing journalists at the end of the MPC meeting in Abuja, the CBN Governor, Mr. Godwin Emefiele, said, “the Committee assessed the relevant risks and concluded that the economy continues to face elevated risks on both price and output fronts.”
“Given its primary mandate and considering the limitations of its instruments with respect to output and conscious of the need to allow this and other measures like the foreign exchange market reforms to work through fully, the Committee decided to retain the MPR at 14.00 per cent, the CRR at 22.5 per cent, the Liquidity Ratio at 30.00 per cent, and the Asymmetric Window at +200 and -500 basis points around the MPR.”
The CBN Governor said they decided to tighten measures because banks were not lending money to farmers and manufacturers but instead were funneling the credit to traders who used the money to demand for foreign exchange.
He added:”There was a time when the MPC took a decision not only to reduce the monetary rate but also the cash reserve. These were intended to lower rates and encourage spending by the private sector. After we did that, because we did not see the impact on the private sector, we further reduce the CRR from 30.5 per cent to 25 per cent. The sum of N1 trillion was injected into the economy through the banks to loan this money but rather than loan this money, those credits went to traders who used them to demand for foreign exchange thereby putting pressure on the foreign exchange market.”