By Tony Obiechina, ABUJA
Head of Banking & Finance Department, Nasarawa State University, Prof Uche Uwaleke has commended the decision of the Central Bank of Nigeria, (CBN) to cut its benchmark interest rate from 14 percent to 13.5 percent.
The CBN Governor, Mr Godwin Emefiele had announced the reduction in rate at a press briefing on Tuesday after a two-day meeting of the Monetary Policy Committee (MPC) in Abuja.
Reacting to the development, Prof Uwaleke noted that the reduction in MPR by 50 basis points “signals the CBN’s desire to relax monetary policy to support economic growth”.
“Obviously, it is a right response to the declining inflationary pressure and the relative stability in exchange rate which have prevailed for quite some time.
“Moreover, on the external front, crude oil price has stabilized around 65 dollars per barrel while the US interest rate normalization has slowed down. All these must have combined to influence the MPC decision which is expected to increase the flow of credit to the real sector”.
According to the financial expert, “the reduced MPR will also be positive for the capital market as some of the increased liquidity that will ensue will flow into the equities market. It will also be cheaper for the government to issue bonds given that part of this year’s budget deficit will be financed through domestic borrowing”.
Uwaleke said on the external front, crude oil price has stabilized around 65 dollars per barrel while the US interest rate normalization has slowed down.
“All these must have combined to influence the MPC decision which is expected to increase the flow of credit to the real sector”, he added.
