Daily Trust (Abuja)
4 November 2009
Abuja — The Central Bank of Nigeria (CBN) has left bank's interest rate unchanged at 6 percent to enable people borrow more from banks.
Governor Sanusi Lamido Sanusi of CBN announced this yesterday at a press briefing after the Monetary Policy Committee (MPC) meeting in Abuja.
He also said that an asymmetric corridor of interest rates around the Monetary Policy Rate (MPR) has been introduced.
He said the rate on the standing lending facility will remain at 200 basis points above the MPR, "while the rate on the standing deposit facility will be 400 basis points below the MPR."
According to Sanusi bank's excess reserves with the CBN in October were high with average daily excess reserves exceeding the average in any of the preceding four months of the year.
He said some banks took recourse to standing deposit facilities with increase in the middle of October. "No bank accessed the standing lending facilities during the same period", he said.
The Governor said that there will be quantitative easing to bridge the gap currently estimated at about N500 billion between the levels of the current monetary aggregates and the benchmark level for the year. He said: "The modalities for quantitative easing include investments in bonds to be issued by Asset Management Company (AMC). "Other modalities include the redemption of promissory notes issued by the Federal Ministry of Finance as well as by the CBN in connection with the retirement of debt and liabilities arising from purchase and assumption of failed banks."
He said that purchase of loans by banks under the AMC will be based on terms aimed at strengthening the balance sheets with a focus on asset quality, improving liquidity and capital adequacy as well as on reducing debt overhang relating to the stock market in order to stimulate activity in the capital market.
The Governor also said that with effect from November 16, temporary ban placed by CBN on the use of Banks' Acceptance (BAs) and Commercial Papers (CPs) will be lifted, saying guidelines will be issued by the CBN prior to that date.He also said that the one percent general provision on performing loans contained in the existing prudential guidelines is hereby waived for the 2009 as a countercyclical measure. "New prudential guidelines will be issued before the end of the Q1 2010", he said.
Sanusi said provisional figures showed that Nigeria's economic growth accelerated to 7.58 percent in the third quarter from 7.22 percent in the second quarter.
He said broad money supply (M2) up 5.6 percent year-on-year by the end of September, and this reflected a slowdown in credit to the private sector and suggesting the need for continued "accommodative monetary policy."
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