Okonjo Iweala can't stop politicians from spending - Sanusi

Despite her noble intentions at cutting the cost of governance and stabilising the nation's economy, the Minister of finance and Coordinating minister of the economy, Okonjo Iweala cannot win the war against politicians increased spending as the 2015 election approaches. This assertion was made by the Governor Central Bank of Nigeria (CBN) Mallam Sanusi Lamido.

Lamido who gave this troubling submission in Lagos said increased government spending will keep the interest rate at the present benchmark of 12 percent and could spur increase in cash reserve requirement (CRR).

“Despite the best intentions of the finance minister, I don’t see her stopping politicians from spending money in 2014. She’s got all the intentions and all the commitments, but at the end of the day, she doesn’t approve the budget. So there is no way in an election year, when you are not going to have increased spending,” Lamido submitted.

Lamido pointed out that the federal government spending which hit over N2 trillion in four months will continue to grow especially now that it is spending huge amount of money in fighting terrorism and insecurity.

“So the point I am making is that if there is increased spending, what is likely going to happen will be higher interest rate. So people should not look forward to low interest rate at a time of increased government spending.

“There is higher risk of increasing the CRR than reducing it at this point in time. The central bank will have to respond in events of elevated spending."

Sanusi, the MPC members did not see any reason to reduce the benchmark interest rate at the last meeting, saying that “if we reduce the MPR, credit and lending to especially the real sector would go up.”

“ The CBN should not change rates for the sake of changing rates, we respond to situations. The government will spend more money; we will keep monetary policy very tight.”