Emefiele, Nigeria central bank governor says to start cutting interest rates

Nigeria's Central bank Governor, Emefiele

Nigeria's new central bank governor said on Thursday he would pursue a gradual reduction in interest rates, an apparent shift away from his predecessor's hawkish monetary policy that was credited with bringing inflation down to single digits.
Governor of the Central Bank of Nigeria Godwin Emefiele said policy would be aimed at seeking a reduction in overall lending rates to make it cheaper to invest, although he didn't give a time frame for doing so, leaving it open for him to hold off until the monetary conditions allow it.
Interest rates have been stuck at 12 percent since late 2011, and several measures have been made to tighten liquidity, which has been credited with gradually bringing inflation down, but businesses complain that lending rates are too punitive.
"There is no doubt that reducing interest rates and maintaining exchange rates are very daunting twin goals," Emefiele said.
"However the central bank will work assiduously to ... ensure that these goals are mutually achieved."
Nigerian treasury bills fell 20 basis points across the board on Thursday to an average of 11.3 percent after his remarks, as buyers snapped up bonds. Nigeria's benchmark 10-year bond yield was trading flat on Thursday at 12.52 percent, after initially falling 7 basis points on the new central bank governor's remarks that he would seek to cut interest rates. The 3-year bond yield was down 16 basis points to 11.71 percent.
The core of his vision was zero tolerance to practices that undermine financial stability, he said at his first press conference since taking over on Tuesday from Lamido Sanusi, whom President Goodluck Jonathan suspended in February.
But he gave few details of how exactly that would be enforced. Nigeria suffered a severe financial crisis in 2008 that nearly collapsed nine banks, and Sanusi stepped in with a bail out package and had some of the chief executives sacked.
"Although Emefiele's comments were qualified with the statement that it is a 'daunting' task to achieve the twin goals of reducing interest rates while maintaining FX rates, the very fact that lower interest rates were mentioned sends a strong signal to the markets," said Standard Chartered's Razia Khan.
Emefiele also announced that all charges on deposits of customers at banks are abolished with immediate effect.
Sanusi, a staunch anti-corruption figure, was accused of inappropriately using his position as a pulpit from which to chastise the government for graft. Jonathan removed him just as he was presenting evidence to parliament that some $20 billion owed to the federation account by the state oil firm had not been remitted.
Jonathan's administration denied there was a connection, instead accusing Sanusi of mismanaging the bank's budget.