- Single Digit Inflation Will Enhance Growth -Peterside
Mr. Atedo Peterside, the founder, Investment Banking and Trust Company, has said macroeconomic stability, especially single-digit inflation, will help attract investors into the Nigerian capital market.
Peterside, who spoke after he was conferred with Honourary Fellowship by the Chartered Institute of Stockbrokers, explained that the fear of devaluation of the naira given the surge in inflation rate to over 12 percent had led to capital flight as both local and foreign investors have started hedging against foreign currency.
He said a single-digit inflation rate of about five percent will enhance the investment environment and boost investors’ confidence.
“The problem of the capital market is not the fault of stockbrokers but that of macroeconomic stability framework. In Nigeria, the inflation rate is currently 12 per cent, compared to two per cent in the United States of America. The inflation rate in Nigeria provides incentives for devaluation of the Naira and many investors fear devaluation.
“The fear of devaluation in itself is pushing many investors towards buying foreign currency as a short term bet to speculate exchange rate. The Central Bank of Nigeria has increased the Loan to Deposit Ratio which requires banks to make loan or stop collecting deposit. With the current low interest rate, the policy is punitive. The CBN should bring inflation down to five per cent to stabilize the economy,” Peterside said.
The central bank had last year directed Deposit Money Banks to maintain a 65 percent loan to deposit ratio.
The apex bank said “In order to sustain the momentum and in line with the provisions of our earlier letter, the minimum Loan to Deposit Ratio target for all Deposit Money Banks is hereby reviewed upwards from 60per cent to 65 per cent.
“All DMBs are required to attain a minimum LDR of 65 per cent by December 31, 2019.”
The directive also stated that the ratio will be subject to review in order to drive SMEs, retail, consumer lending and mortgage.
