The Central Bank of Nigeria (CBN) on Wednesday said reducing interest rates “will do virtually nothing” in taking Nigeria’s economy out of a recession.
The apex bank also maintained that there is no quick fix out of the recession Nigeria is currently in.
The Minister of Finance, Mrs Kemi Adeosun, had hoped that the Monetary Policy Committee (MPC) would lower key interest rates.
“We would love to see the MPC reduce interest rates because we think in terms of business activity that would deliver greater results to Nigeria”, she told Channels Television in an exclusive interview.
However, speaking on Sunrise Daily, the Director, Monetary Policy Department of CBN, Mr Moses Tule said the MPC had to look at the fundamentals before taking the decision to maintain the rates at 14 per cent.
Mr Tule said a country like Japan has been in recession for more than years despite having an interest rate of less than 2 per cent, adding that the Bank of England has also reduced its interest rate from 0.5 per cent to 0.25 per cent and “still nothing is happening, so the solution does not lie in the reduction of interest rates”, he said.
He also noted that despite the interest rate reduction in the past, the CBN has not seen “that response, in terms of growth in credit”.
He further noted that “we are not just in recession but we are in a stagflation, where growth has reduced precipitously to the negative and you have prices rising, so it is insufficient for the Monetary Policy Committee to just meet and say we are reducing interest rates to address a complex economic situation like stagflation”.
To get out of the economic quagmire Nigeria is in, Mr Tule said the “monetary policy, fiscal policy, trade policy, budget policy sitting together in a retreat to fashion out comprehensively what the policy response is going to be”, insisting that “you can’t clap with one hand”.
He further noted that “all the key policy parameters must be brought to the table to fashion out what the way forward is for the country”.