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 yearâ€™s banking crisis.
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 â€˜stimulate activity in the capital marketâ€™ and improve banksâ€™ 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 Nigeriaâ€™s All Share Index tumbled 34 per cent last year after declining by 45 per cent in 2008.
â€œThe bad debt is partly the result of, at least, N1trn of margin loans used to buy shares.â€
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.
â€œThe 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.â€