Interest rates management is key to rapid economic growth and development’

By Chinora  Ugwu

Interest rates management is key to rapid economic growth and development in a period of economic uncertainty.

Director, Research Department, Central Bank of Nigeria Dr. Uwatt b. Uwatt stated this at the 23rd CBN Seminar for Business Editors and Finance Correspondents held in Sokoto recently. “Factors determining interest rate developments in the country cut across policy and non-policy variables and efforts to narrow interest rate spreads are also highly diverse. Management approach  also need to be multifaceted, involving the central bank, the fiscal authorities and the banks. Cutting interest rate: deliberate policies to narrow interest rates spreads; effective monetary policy,” he said. “Direct intervention schemes such as exploring development functions of the Bank and moral suasion according to him play vital role in the interest rate management.

He however, listed factors affecting the interest rate management to include high inflation rate, degree of risks and uncertainty faced by economic agents, shallow financial market, the structure of the banking  system, high government borrowing and high cost of operations for the banks 

Also speaking at the occasion, the Special Advisor to the Governor of CBN on Financial Markets, Emmanuel Ukeje, Ukeje listed factors that affect the exchange rate to include lingering challenges of global financial crises and impact on the Domestic FX Market, decline of Crude oil prices; the main source of forex to the economy and reduced accretion to the external reserves.

With the announcement of possible reduction in the asset purchase programme by the US Federal Reserve Bank in May 2013, he said, the US dollar strengthened against some other currencies.

So also yields went up and prompted disinvestments from emerging markets, as investors moved their funds from riskier markets to the United States and repatriation of investments by foreign portfolio managers in both the capital and money markets.

The advisor, stated that the security challenges were among other factors that domestically affected the growth of the foreign exchange market. So also insecurity in the country, especially in the north-east and south-south region as well as the economic landscape has continued to cast doubts on the quick recovery of the fragile economy.

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