01 December 2013, Lagos – Mr Wale Abe, the Executive Secretary of Financial Markets Dealers Association, FMDA, says the N5.74 trillion facility given banks by the CBN will help to reduce interest rates in the country.
Abe made the observation in an interview on Friday in Lagos.He also said that availability of liquidity in the financial system would encourage Nigerians to borrow from banks at low interest rates.
CBN injected the N5.74 trillion through Standing Lending Facility, SFL, to banks at 14 per cent interest rate.Abe said that the low interest rates would automatically boost economic and business activities.
“Irrespective of the amount injected into the system, once there is an injection, it simply means that money will be readily available in the system for those who intend to borrow.
“The rationale behind the injection is to bring down the interest rate so that people who intend to borrow can do business,” Abe said.
Abe said that the CBN was managing liquidity in the system through injection and withdrawal of funds.
He however, said that the CBN could at anytime mop up such injected funds from system if it perceived that there was excess liquidity.
Abe pointed out that the CBN could also mop up excess liquidity so as not to distort price level stability and cause inflation in the country.
“The CBN is always out to do the needy. The needy are that it injects money or withdraws money from the system.
“That is part of the monetary responsibilities and function of the central bank to ensure price level stability,” he said.