The Federal Government has said it is working towards reducing interest rate to single digit by the year 2020.
Minister of State for Budget and National Planning, Zainab Ahmed, stated this on Thursday at the 23rd Nigerian Economic Summit (NES#23) in Abuja.
In September, the Central Bank of Nigeria (CBN) during the Monetary Policy Rate meeting left its benchmark interest rate unchanged at 14 percent.
Speaking at a panel on ‘Economic Inclusion and a case for a united Nigeria’, the Minister said the Economic Recovery and Growth Plan (ERGP) seeks to achieve macro-economic instability through steady and sustainable coordination of the country’s monetary and fiscal policies.
She pointed out that the Plan would also align monetary, fiscal and trade policies to ensure a more favourable balance of trade with the country’s trading partners.
The plan, which covers the period from 2107 to 2020, is designed to, among other objectives, enhance the country’s economic recovery, and also serve as the much needed catalyst for growth and sustainable development.
She blamed previous administrations for failing to carry out new investments in the oil and gas sector despite high oil prices in the international market.
“The first priority of the ERGP is stabilising the macro-economic environment. We have a focus to reduce interest rate but also to reduce inflation and the target is to reduce interest rate to single digit by the year 2020. We can’t move from 18 percent to two percent in one or two years. We didn’t get here overnight. We were all here when things were going bad. We were here when oil was at $120 bpd and no investment was done, no new infrastructure,” she said.
She explained that the Federal Government is borrowing heavily from external sources than the domestic front to enable financial institutions in Nigeria give loans to local investors.
Breakdown of the borrowing in this year’s budget indicated domestic borrowing of N1.254 trillion and external borrowing of 1.067 trillion.
But some participants submitted that the impediment to borrowing locally is the high interest rate. They also called for harmonisation of both monetary and fiscal policies.
Recall that the International Monetary Fund (IMF) had warned Nigeria and other emerging markets and other low-income countries over reliance on foreign loans.
On Tuesday, President Muhammadu Buhari had asked the National Assembly to approve $5.5 billion external loan.
The loan is part of the 2016-2018 External Borrowing Plan of the Federal Government and is meant to finance capital projects in the 2017 budget and refinance maturing domestic debts.
Other panelists including former Minister of Education, Oby Ezekwesili and Executive Director, Development Specs Academy, Okey Ikechukwu, called for social inclusion policies targeted at the weak and vulnerable in the society.
According to them, the cost of borrowing is still high in a country that urgently needs economic growth that would be driven by small and medium scale enterprises.