Less than two months after the Central Bank of Nigeria raised the lending rate to 12 per cent from 9.25 per cent, there are indications that the Federal Government may prevail on the apex bank to reduce the rate in order to stimulate borrowing by the real sector of the economy.The Monetary Policy Committee of the bank had on October 10, 2011 raised the Monetary Policy Rate by 275 basis points from 9.25 per cent to 12 per cent, the highest increase since the introduction of the MPR in 2007, but the Minister of Finance, Dr. Ngozi Okonjo-Iweala, gave a hint on Monday that the government might force down the rate.Reutersquoted her as saying at a forum in Lagos, We are working well with the Central Bank of Nigeria, talking about coordinating monetary and fiscal policy. Theres always a tension thats going to be there but I think we have a very good dialogue going on.Of course, interest rates were jacked up recently by 275 basis points. That helped in steadying the currency, but I think theres a room now for us to start aiming for it to come down.The reason, according to her, is to keep inflation in single-digit, but this is contrary to the position of the CBN, as the apex bank had said last week that the recent trend of monetary tightening might not be over.The CBN had kept the benchmark interest rate on hold at 12 per cent last week, bringing to an end six rate hikes this year alone as the regulator looked to support the weakening naira and curb high inflation.The Governor, CBN, Mr. Lamido Sanusi, had said that although monetary tightening had been paused, the bank was willing to step in again if inflation or exchange rate pressures returned.The naira weakened on Monday and was close to the edge of the weakest margin of the central banks target band, which was moved in a depreciation of the currency last week, according to Reuters.Consumer inflation in the nation rose to 10.5 per cent year-on-year in October, up from 10.3 per cent the previous month.Many analysts have predicted that there will be more rate hikes next year.Okonjo-Iweala, who joined President Goodluck Jonathans cabinet in August, began her tenure by pledging to end the chaotic budget process by getting the 2012 spending plan on time and with a reduced fiscal deficit.Shortly after her arrival, she said the budget would be ready for lawmakers by October or November at the latest, but on Monday, she would only commit to saying it would be ready soon but remained firm on fiscal tightening.We need to be more prudent because we dont know what will happen to oil prices. We want to make sure that our fiscal deficit is financeable. In the past couple of years, I think we have been unsustainable, she said.
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