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Nigeria to keep benchmark rate at 6% to boost lending

By Amaka Agwuegbo
The Central Bank of Nigeria (CBN) has left its benchmark interest rate unchanged in its bid to ease credit shortage caused by last year’s banking crisis.

Sanusi
Sanusi

Speaking at a briefing in Abuja, the CBN Governor, Lamido Sanusi Lamido, said though the monetary policy rate was held at 6 per cent, the key rate was last cut by 1.75 percentage points in April.

The CBN, last year, bailed out the banking industry at a cost of N620bn ($4 billion) to ease a credit squeeze, while sacking eight bank chief executive officers. The bank expects senate to approve the creation of a company to buy bad debts from commercial banks in about three weeks, Sanusi said today.

The purchases will ‘stimulate activity in the capital market’ and improve banks’ balance sheets, Sanusi said earlier.

Eurasia Group, a New York-based research company, stated that Nigerian banks may have as much as $10bn of toxic assets, while the Bank of America Corp pointed out that Nigeria’s All Share Index tumbled 34 per cent last year after declining by 45 per cent in 2008.

“The bad debt is partly the result of, at least, N1trn of margin loans used to buy shares.”

But, according to Pabena Yinkere, an analyst at Access Bank Plc, he believes that what the CBN is trying to do is improve liquidity and increase confidence in the financial system.

“The proposed company would be a win-win for everybody so that banks can begin to lend again, companies can resume normal activities and the economy can grow.”


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