The Chief Executive Officer of Financial Derivatives, Bismarck Rewane has said the adjustment of the Asymmetric corridor around interest rate by the Central Bank of Nigeria Monetary Policy Committee will reduce the pressure on Nigeria’s Foreign Exchange.
The renowned economist disclosed this on Tuesday on Channels
Television while reacting to CBN’s hike in interest rate by 50 basis points to
26.75 percent.
He explained that the real deal is the MPC’s adjustment of
the Asymmetric corridor around the Interest rate to +500/-100 from +100/-300
basis points.
He noted that this move would increase the cost of banks’
borrowing and deter borrowing from CBN to buy foreign exchange.
He added that the decision will boost Foreign Portfolio
inflows in Nigeria.
“The interest rate increase is 50 basis points. The real
deal is the Asymmetric corridor adjustment. What this means is that banks have
been borrowing from the Central Bank to buy foreign exchange from the Central
Bank. Before they were borrowing at 26 percent.
“As of today, they will be borrowing at almost 32 percent.
That difference is almost 5-6 percent. It means the cost of borrowing has gone
up astronomically, this means a deterrent to borrowing from the CBN to buy FX.
“That should reduce pressure on the foreign exchange rate.
It is a subtle way of telling banks to stop robbing Peter to pay Paul”, he
said.
Recall that the CBN raised interest for the fourth time in
2024 to 26.75 percent amid efforts to tackle core and food inflation which
stood at 34.19 percent and 40.87 percent, respectively.
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