Lagos – Financial experts on Wednesday expressed disappointment at the retention of the Benchmark interest rate by the Central Bank of Nigeria (CBN), saying that the decision was antithetical to economic growth.
The experts told the News Agency of Nigeria (NAN) in Lagos that retaining the Monetary Policy Ratio (MPR) at 14 per cent and the Cash Reserve requirement (CRR) at 22.5 per cent did not reflect the present economic reality.
NAN reports that the CBN rose from its first Monetary Policy Committee (MPC) meeting in the 2017 fiscal year on Tuesday with a unanimous decision to retain the MPR and other monetary policy parameters.
Citing inflationary pressures, the CBN said that the committee was “reluctant’’ now to lower the MPR, but added that it would not hesitate to do so when it becomes expedient.
Mr Femi Ekundayo, a former President, Chartered Institute of Bankers of Nigeria (CIBN), said that retaining the MPR at 14 per cent was not healthy for the economy.
According to him, no economy in the world can experience economic growth with an interest rate that is high.
He explained that a slight reduction in the MPR would encourage more investors into the economy.
“Which economy can we experience growth with rising interest rate.
“If the MPC had allowed a slight reduction in the interest rate, more people will be inclined to invest.
“When the cost of borrowing is too high, it will discourage production,’’ Ekundayo said.
The financial expert wondered why members of the MPC would express reluctance to push for a rate cut.
He said that the gesture of “reluctance’’ showed that members were “gravitating towards their master’s voice.
“The drift is totally opposed to the mentality of people who are prone to economic development.
“When people find it difficult to analyse the true position of the economy and are not technically minded, they tend to maintain the status quo,’’ Ekundayo said.
He added that retaining the MPR for almost two quarters had not translated to a reduction in inflation rate since it had continued to increase unabated.
Prof. Sherifdeen Tella, a Senior Economist at the Olabisi Onabanjo University, Ago-Iwoye, Ogun, said that the outcome of the MPC meeting did not support the present economic reality.
Tella said the inflation the CBN claimed to be controlling had its root beyond monetary policy controls.
The economist argued that the present spike in the inflation rate was caused by among others, the volatility in the exchange rate and a high interest rate.
“We do not understand what kind of economics the CBN is operating. One is really surprised at some of the decisions of the apex bank,’’ Tella added.
