Finance Minister wishes interest rate cut to help economy

Minister of Finance, Mrs Kemi Adeosun has expressed the wish that the Central Bank of Nigeria (CBN) lowers interest rates so that the government can borrow domestically to boost the economy without increasing its debt-servicing costs.

Speaking on Monday in an interview on CNBC Africa television, Adeosun said she was working with the Debt Management Office (DMO), Sovereign Wealth Fund and the pension industry to issue an infrastructure bond to raise money for road and housing projects.

She said she wanted the CBN to reconsider its July interest rate hike, which it implemented to help support the naira and attract foreign investment inflows.

“We need lower interest rates because when we are borrowing and interest rates go up, it increases our cost of debt service and it reduces the amount of money that is available to spend on capital projects,” she said in the interview.

“The attempt is to manage inflation and the trade off for the economy right now is what a bigger problem is: Is it growth or inflation? For me it is growth. I would rather seek growth. We can manage inflation. I think for us, at the moment in the Nigerian economy, growth is the most important thing.”

Adeosun equally explained in the course of the interview that the government was working with parliament to cut procurement timelines to get contractors back to work and inject money into the economy.

Nigeria has said before that it plans to set up a $25 billion infrastructure fund to invest in the transport and energy sectors.

She said some adjustment was needed to narrow the spread between the official and black market currency rates, which is running at 25 percent after the CBN floated the naira.

“We still need to make some necessary adjustment to ensure that the spread is narrow so that we have true price discovery,” she said.

The CBN is currently holding its MPC meeting in Abuja and it is due to announce its rate decision on Tuesday.

Economists polled by Reuters last week predicted that the CBN will keep its key interest rate at 14 per cent and reiterate its focus on resuscitating the economy.

The nation’s economy officially slid into recession for the first time in more than 20 years in the second quarter, and the naira was quoted at a record low of 425 per dollar on the black market as hard currency shortages continued to hurt businesses.