The closely knitted system called the economy of any Nation operates largely on strong monetary and fiscal policies put in place to weigh and regulate economic situations and decisions by the apex bodies. In this light, the Governor of the Central Bank of Nigeria on Saturday, 30th of November, 2013 at the anniversary of Women in Successful Careers reiterated why the Monetary Policy Committee is yet to review the interest rate after such a long period.

As is the case with economic interplay, the reduction of interest rate would increase borrowings and would lead to excess money in circulation which invariably leads to persistent increase in prices of goods, commodities and service-inflation. He confirms that reducing interest rate is the easy for the Central Banks of countries to do but he insists that the interest rate in Nigeria cannot be any lower unless there is a corresponding increase infrastructure in various sectors of the economy. This issue should be thoroughly contemplated he says and went on to ask participants what the corresponding effect on inflation and exchange rate will be should interest rate be reduced as clamored for. The picture is largely catastrophic and bleak.

He further clarifies that the main reason for keeping the interest rate as it is, is to encourage the steady growth of Small Scale Enterprises as high inflation would negatively affect the access to funds. Giving examples of high cost structure of SMEs during production, he suggests that with good state of infrastructure in the country, even with an interest rate of 26%, businesses will still be profitable.

By Unen Ameji.
Author/Blogger

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