The Central Bank of Nigeria (CBN) has said it will sustain its market-driven interest rate policy in the 2024/2025 fiscal years.The bank also informed that its ways and means advances to the Federal Government to finance deficits in its budgetary operations remain a maximum of 5.0 per cent of the previous year’s actual collected revenue.
The apex bank in its Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2024-2025 document released yesterday, said it will continue to influence interest rates indirectly through the adjustment of its anchor rate, the Monetary Policy Rate (MPR).
Accordingly, the CBN, said: “Interest rates used by banks in the 2024/2025 fiscal years shall comply with the following guidelines, including, that banks shall continue to pay negotiated interest rates on current account deposits at the instance of the customer; shall continue to pay negotiated interest rates on savings account deposits as provided in Guide to Charges by Banks, Other Financial and Non-Bank Financial Institutions, or any other policy, circular or guideline that may be issued by CBN from time to time.
“Where special-purpose deposits (such as deposits held as collateral or other similar deposits) are held, banks shall pay interest at a rate negotiated with the customer, subject to a minimum of 30.0 per cent of MPR per annum for naira denominated deposits.”
It also noted that the applicable interest rate on foreign currency-denominated deposits held as collateral shall be negotiable. On Ways and Means, the apex bank said any such advances shall be liquidated as soon as possible and shall in any event be repayable at the end of the year in which it was granted.
“Consistent with the banking arrangement of Treasury Single Account (TSA), Ways and Means Advances would now be determined after recognising the sub-accounts of the various
MDAs, which are now linked to the Consolidated Revenue Fund (CRF) to arrive at the FGN consolidated cash position,” the bank said. The new guidelines also said the bank would implement an explicit inflation-targeting framework to enhance the effectiveness of monetary policy during the period.
According to the guideline, to complement the new inflation-targeting environment, CBN will continue to monitor the growth in monetary aggregates to ensure that it remains consistent with the inflation objective of the Bank. In addition, short-term interest rates will be monitored to avoid volatility to anchor expectations in the financial markets.
It said the 2024/2025 Guidelines coincide with the unification of the naira exchange rate windows to align the exchange rate with market realities and curtail unnecessary demand pressure and activities of speculators.
It would be recalled that about two months ago, the Senate and the House of Representatives passed a bill increasing the percentage of Ways and Means loans the CBN can advance to the Federal Government from five per cent to 10 per cent. That bill was criticised by economic experts, who argued that if the increase was allowed, it could create excess liquidity.
