Abuja – An economist, Prof. Uche Uwaleke, has expressed the fear that the Central Bank of Nigeria (CBN’s) decision to lower bank lending rate can result in further depreciation of the naira.
Uwaleke expressed the concern on Thursday in an interview with the News Agency of Nigeria (NAN).
He said: “More money in the system could further bring about a depreciation of the naira, especially in the parallel market as the demand for foreign exchange is likely to increase.
“It may also lead to increase in the inflation rate which stands at around 9.3 per cent.”
Uwaleke, however, advised the banks to lend to the real sectors of the economy.
According to him, this will ensure that in the medium to long term, the resultant output will offset any inflationary pressure the measure is likely to bring about.
Uwaleke noted that the CBN’s decision to slash the lending rate from 13 to 11 per cent would inject more money into the nation’s economy.
He also said that the reduction of the Cash Reserve Ratio (CRR) would place Deposit Money Banks in a better position to lend following improved liquidity position.
“ If these additional funds are properly channeled to the real sectors such as agriculture, manufacturing and solid minerals, the country’s output is bound to increase.
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“ This will also lead to more employment opportunities for the teeming youths.
“The capital market is also expected to benefit by way of increased demand for shares and other securities as a result of increased liquidity, so it is a welcome development,’’ Uwaleke said. (NAN)