Speaking during an interview with ARISE News on Friday, Teriba said the CBN should focus on a single credible interest rate that reflects market realities and influences economic activity.
“Narrow your monetary policy instrument down to one. One credible interest rate that is realistic, that connects with the market, that will move the market.”
Teriba said CBN Governor Olayemi Cardoso had acknowledged the need to align, reset and recalibrate interest rates to reflect prevailing economic conditions.
“Governor Cardoso himself has acknowledged that there is a need for alignment, reset and recalibration of interest rates.”
He said the misalignment between the CBN’s policy rate and market rates had persisted for years, stressing that monetary policy decisions should be based on measurable market data.
“I’m happy that the central bank governor is leading the charge for the alignment, for the reset, for the recalibration.”
Teriba said the CBN should provide clearer information on net reserves, money supply and other quantities linked to its monetary policy decisions.
“The CBN needs to provide clearer information on net reserves, money supply and the quantities associated with its monetary policy decisions.”
He said discussions about interest rates should also consider the underlying quantities that determine how monetary policy affects the economy.
“If you want to reset, if you want to realign, if you want to recalibrate, you can’t leave the quantities out of the conversation. You’re a central bank, you have access to all the quantities.”
Teriba also questioned the use of the overnight interbank rate as a key reference for monetary policy alignment, saying Treasury bill and open market rates were more accessible indicators of market activity.
“Why are we using the overnight interbank rate as the reference? Treasury bill rates and open market rates are more accessible indicators of what is happening in the market.”
He said the CBN should use measurable market rates to determine whether its policy rate is properly aligned.
“Anything more than 25 basis points above those reference market rates, where transactions actually take place, is the needed reset, is the needed recalibration. None of that has happened yet.”
Teriba acknowledged steps taken by the current CBN leadership to address problems inherited from the previous administration but said further adjustments were needed.
