Nigeria sticks to 14 pct interest rate despite economic recession

Nigeria has decided to stick to its interest rate at 14 percent despite an economic stagflation.

The country's Monetary Policy Committee, after a two-day meeting in the capital, Abuja, on Tuesday unanimously voted to retain the interest rate, also retaining the cash reserve ratio at 22.5 percent and liquidity ratio at 30 percent.

Governor of the Central Bank of Nigeria Godwin Emefiele told reporters that fiscal policymakers took the decision after a critical assessment of the risks that rates reduction could pose to the economy.

With this decision, the policymakers have, once again, dismissed the calls by economy and financial experts in the country for rates reduction, to enable the government to borrow domestically to boost the economy without increasing debt servicing costs.

The apex bank chief said the calls for rate reduction came mainly from an erroneous belief that reducing interest rates will spur credit growth in the private and public sector, which will help provide liquidity to stimulate consumption and investment spending.

Nigeria's economy officially entered recession in September.

Figures released Monday by the National Bureau of Statistics further showed a weak macroeconomic performance when the Gross Domestic Product (GDP) in real terms contracted by 2.24 percent year-on-year in Q3 of 2016.

Local economic experts said a GDP growth of at least 4.32 percent in Q4 of 2016 would be needed for a possible way out of recession.

The apex bank said it would continue to deploy its development finance interventions to complement the overall effort of fiscal policy toward reinvigorating the economy. Endit