El-Rufai Governor faults CBN's decision to increase lending rate

The Kaduna state Governor, Nasir El-Rufai, has faulted the Central Bank of Nigeria (CBN's) recent increase in lending rate.

El-Rufai also said the Federal Government might be forced to reduce the lending rate through legislation.

The CBN had earlier announced the increase in the lending rate from 12% to 14%, in a bid to tighten money supply.

El-Rufai also faulted the CBN's practise of raising the interest rate above the inflation level, saying it does not make sense.

Punch reports that the Kaduna Governor cited the United Kingdom (UK), saying “While inflation in the United Kingdom was between seven and eight per cent, the lending rate was currently one per cent.”

He also said “We have a central bank that has an MPR at what? Fourteen per cent, and banks lending at 20 per cent. Only traders and drug dealers can make money at this interest rate.

“I have said it before and I will repeat it again, unless the central bank and the banking system make a conscious decision to bring the interest rate down, one day we will legislate it.

“The rate of inflation in the UK is not two per cent or one per cent. It is seven to eight per cent. But lending rate is at one per cent. I think they cut the interest rate last week.

“We must decide that businesses should be able to borrow at the interest rate that makes sense and politically lower rates to that level.”

There are also strong indication that the CBN might allow banks to write-off bad loans this year.