Godwin Emefiele, CBN Governor

Mr Godwin Emefiele, the Governor of Central Bank of Nigeria (CBN), says easing the Monetary Policy Rate (MPR) will pull real lending rates to a negative territory.

Emefiele said this while addressing newsmen on Tuesday in Abuja on the outcome of the Monetary Policy Committee (MPC) Meeting.

He said that any reduction in MPR would be a disincentive to investments in the country.

He said that disincentives to investment would hurt the stability that had been achieved in the Foreign Exchange (Forex) market and there was need to ensure this would not happen.

“That is the rationale and the actions of the MPC will be reflected in whatever direction we think is good for Nigerians.

“As Nigerians, we should understand that there is a need for a low interest rate because we know that it will make it easy for people who want to borrow money at a low rate.

“We know easing will inject liquidity in the system.

“But we are saying that inflation rate at 16 per cent at the moment is still considered very high in the light of studies that have been conducted.

“Studies conducted have shown that there are acceptable modules for computing the inflation threshold and these modules have computed inflation threshold for Nigeria at a range of between 10 to 12 per cent.

“And what that means is that when inflation is above 12 per cent, no matter the action that you take to stimulate growth it will retard growth,’’ he said.

Emefiele said that the important thing to do was to reverse the trend in inflation and expressed delight at the effort made so far at reducing the rate from 18.8 down to 16.1 per cent.

He expressed optimism that the rate of inflation would continue to trend downwards in the nearest future.

On the banks’ complaints about liquidity mop-up, the CBN governor said bankers were economic agents interested in making profits.

He said the CBN, however, as a regulator faced with the various data confronting it, had a role to play in stabilizing the economy.

“And doing our work means we must continue to do what we have done to continue to achieve the sliding trend in inflation and stabilise the foreign exchange market.

“That is what we are doing by injecting dollars into the market and we will continue to do so until we get to a point where the MPC thinks is the right direction.

“The CBN remains a player in the market and from time to time, given our sensibility on where we think the market should be, we will intervene.

“And that is why you have seen our level of intervention in the last five or six months and I want to seize this opportunity to say that the intensity for that intervention will continue,’’ Emefiele said.

On the intervention of the CBN on Etisalat, the CBN Governor said it was temporarily, adding that the intervention was to ensure stability in the industry.

According to him, Etisalat is one of the four biggest telecom company in Nigeria with subscriber base of over 20 million, a very robust revenue base and employs over 4000 people.

“We observed that the activity and attempt by some creditors was going to lead to the dismemberment of that company and we thought that the subscribers could not run about without services.

“And we could not allow over 4000 staff of this company to run in disarray because something wrong has happened

“That is why we, the regulators, decided to intervene so as not to hurt interest of people that have interest in the company.

“I must say that the intervention has been positive, the company has retained its subscriber base, its staff have continued their work and its revenue has remained stable at about N16 billion monthly.

“The intervention through the institutionalisation of an interim board headed by the regulators is temporary and our plan is that this should not take more than 180 days.

He said that advisers had been appointed to midwife the process for a major investor to intervene in the company and take it over.

He said that potential investors were already showing interest and at the end of the day the best candidate would be chosen.