The Central Bank Financial Think Tank has sent a strong recommendation to the federal government on the deregulation of interest rates asking for a downward review of the rates.
Financial sources told The Republic that the country’s premier bank was not happy the way and manner the deregulation was carried out.
According to the sources the Central Bank viewed with concern the jump of the lending prime rate from 11% to 15%.
The CBN, financial sources disclosed without taking into consideration the socio-economic situation in the country.
The prime rate according to sources was arbitrarily fixed by government economic experts whom the sources accused of manipulating the economy as if they were in the class.
Financial sources further said that in deciding what the prime lending rates would be, vital economic parameters should have been taken into consideration.
The sources also said that if CBN were given the chance it would have been a matter for the banking committee and other financial circles to debate and decide before fixing the rates.
The sources hinted that as of today, the government would not want to appoint persons whose strong convictions would make them stand their grounds on the principle as against what the government wants.
Continuing the source said, that was why Olashore and Ayagi had to go, for opposing the fixing of the lending prime rate by government. The financial sources added that by fixing the prime rate government had made up its mind on the direction it wanted interest rates to go.
Already the interest rate phenomenon has sent shock waves across the financial market. There is now uncertainty in the capital market as investors are no longer willing to borrow from banks due to high interest rates of 18.21%. As a result of high interest rates, most industries are now faced with problems of getting short term working capital. Financial experts are of the view that economic growth will be stifled and many more industries will be forced to close down.
The fear being expressed in financial circle is that government might not be willing to swallow its price and accept CBN’s recommendation for a review of the prime lending rate on which other banks’ lending rate revolve.
