•MPC retains interest rate at 11.5%
Banks have resolved to recall all loans to state governments.
They got an ally in Central Bank of Nigeria (CBN) Governor Godwin Emefiele, who insists that states must pay back all the loans extended to them by Deposit Money Banks (DMBs) and the apex bank.
The commercial banks have written to the Federal Government to start deducting the loans from allocations going to the states under the Federation Account.
Emefiele told reporters at the end of the Monetary Policy Committee (MPC) meeting in Abuja, yesterday, that there was no going back on the repayment of the loans.
He said the MPC decided to retain the MPR at 11.5 per cent; retain the asymmetric corridor of +100/-700 basis points around the MPR; retain the CRR at 27.5 per cent; and retain the Liquidity Ratio at 30 per cent.
The CBN boss said: “There are two aspects to this (the loans). There are intervention facilities granted by the CBN and there are bilateral facilities granted by the DMBs to state governments.
“State governments went to DMBs and asked for loans; they signed the offer letters with those banks. They gave the instructions to the Federal Ministry of Finance that on a monthly basis, the ministry should deduct from their monies and pay the banks for the loans they have taken. “The banks have written to the finance ministry and they have copied me that they want their money.
Emefiele said: “It was a bilateral agreement. In fact, because of the privacy of contract here, I am not part of it. So, they should pay their loans.”
On the CBN intervention facility to the states, Emefiele said the apex bank “is engaging the National Economic Council (NEC) and the CBN is also insisting on its loan being paid, saying that the outcome of engagement between CBN, Finance and NEC will determine when “we will begin to take the monies.”
Advising the states, he said: “In any case, if you take a loan, you pay so that when you go back to the bank you can get, but if you refuse to pay, you will never smell the door step of the banker again.”
Emefiele has given the assurance that digital currency will be recognised and allowed to be used in Nigeria.
Commenting on the fate of cryptocurrency and other digital currencies, Emefiele said: “I have heard about digital currency. We are working on it and have set up our committee and I can assure everybody that digital currency will come to life in Nigeria.”
“With regards to cryptocurrency in particular, the CBN governor said the apex bank has carried out investigations and discovered that a substantial percentage of what our people involved in cryptocurrency are getting is not the best.
“Don’t get me wrong, some may be legitimate, but most are illegitimate and I will corroborate that under cryptocurrency and bitcoin, Nigeria comes second, but in the global side of the economy, Nigeria comes 27th. So, do you think that there is some correlation, you think those countries which economies are between 2nd and 26th will allow you to grow your cryptocurrency business to second position if there was a big deal that is going to profit everybody?
”It’s not that simple,” he said, “but we are still conducting our data, we will make our data available but what I am saying is that of course, we saw it that the market collapsed. If the dollar is not coming into Nigeria’s economy, I have no reason to think it’s a legitimate business.”
On the state of insecurity, Emefiele said: ”There is connectivity between economy and security and for an economy to grow the level of insecurity must be low.”
Emefiele expressed optimism “that the security institutions are doing their best to tackle insecurity. I am aware that at least six Tucano fighter jets are coming in August and I therefore will like to appeal to our brothers who have decided that they want to live in the bush and forest that they should please begin to retreat, drop their arms and embrace the Anchor Borrowers Programme (ABP) as it will help them else they will be confronted by security as this battle continues”.
On foreign exchange management, Emefiele said: “We are still running a managed float where we are monitoring market and seeing what is happening for us to ensure that the right things are happening for the good of the Nigeria economy.”