...says FG, spent N2trn in 4 months
The Central Bank of Nigeria CBN, Governor, Mallam Lamido Sanusi has said that Federal Government's high spending was one of the major reasons why interest rate could not be lowered at this time.
Sanusi, who spoke yesterday at first National Risk Management Conference in Lagos said that the CBN's Monetary Policy Committee MPC did not see any reason to soften the benchmark rate for banks to lend to customers, "adding that it is not that if we reduce the Monetary Policy Rate credit and lending to especially the real sector would go up." According to Sanusi the Federal Government has spent over N2trn in four months.
"Government spending will continue to grow especially now that it spending huge amount of money in fighting terrorism and insecurity. The emergency rule declared in the three North Eastern states will result in additional spending by government, the apex bank might have to tighten the MPR if there are serious risks on the fiscal side."
He noted that although the government has announced that there will be no supplementary budget, the Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo- Iweala has already announced that there will be a drawdown on a Contingency Vote embedded in the 2013 Budget to cover emergencies."
The CBN boss explained that in taking decision on the MPR the committee was of the view that government spending will constitute a major risk to the inflation and exchange rate outlook, thus advising prudence in monetary policy action at this time
"The CBN should not change rates for the sake of changing rates, we respond to situations. The government will spend more money, we will keep monetary policy very tight, if the spending gets excessive, we will respond appropriately. The risks if there is any from the fiscal side, is that we may actually have to tighten policy further if this warrants. I don't think that at this point in time, a reduction in rates is not imminent", he said.
The governor said the effects of the global financial crisis is still apparent to us as they work their way through the world economy in the form of wide spread public debt and lethargic economic growth.
According to him since the start of the crisis, the CBN has taken a number of steps to address the underlying weaknesses in risk management and corporate governance across the industry including; repealing the universal banking model and introducing a new banking model that ring fenced banking from other activities to safeguard depositors' funds.
National Mirror