Abuja – Economic experts on Wednesday expressed concern over the decision by the Monetary Policy Committee to retain the country’s lending rate at 14 per cent.
They told the News agency of Nigeria (NAN) in Abuja that retaining the lending rate would discourage small business owners from doing business and might take them out of the market.
Monetary Policy Committee on July 25 retained the Monetary Policy Rate (MPR) at 14 per cent, Cash Reserve Ratio (CRR) at 22.5 per cent, liquidity ratio at 30 per cent and the asymmetric corridor at +200 and -500 bases point around the monetary policy rate.
According to the committee, easing the MPR will signal the committee’s sensitivity to growth and employment concern by encouraging the flow of credit to the real economy.
Dr Charles Nwaekeaku, an Associate Professor and former Head of Department, Public Administration, Nasarawa State University, Keffi, said most small business owners depended on bank credit to survive their businesses.
He said: “My problem is that if the lending rate is not reduced, how will the Small and Medium Enterprises(SMEs) survive since most of them depend on bank credit to survive.’’
“If you do not reduce the lending rate now, it means that the cost of production will continue to be high.
“And if the cost of production continues to be high in addition to the irrational nature of the economy, it means that most of the SMEs will fold up thereby aggravating unemployment rate.
“Again it also means that our effort toward promoting export business will also be in jeopardy as we will have no products to export.
“So I think Central Bank would have considered lowering the interest rate in order for Small and Medium Enterprises to pick up.
“And the consequence of this action is that in no distant time more small and medium enterprises may fold up, even some large enterprises may also fold up without credit facility.
“From official point of view, the decision by the committee was right but they should have considered the consequences in the long term,’’ he said.
On the country’s inflation rate, Nwaekeaku said the decline in inflation rate as pronounced by the government was official, adding that unofficially the cost of commodities in the market was still high.
“Government officials are entitled to their views but an average Nigerian who wears the shoe, knows where the shoe pinches.
“Go to the market and see if the prices of most of the commodities have come down.
“The saying that inflation is reducing is still in principle, it is yet to be translated into practical reality, although it is our prayer that it is reduced to practical realities.
“May be with time, we shall see it but right now if you ask any average trader he will tell you that nothing has changed.’’
Dr Uche Uwaleke, the Head of Banking and Finance, Nasarawa State University said it was high time something was done to ease access to credit, especially with regard to the private sector.
Uwaleke said that loosening the monetary policy would aid quick recovery of the country’s economy.
“I would have loved to see a gradual drop in the MPR beginning this month for the fact that inflationary pressure is starting to moderate and exchange rate is to an extent stable.
“I strongly think that loosening monetary a bit at this time is the fillip the economy needs to make a quick recovery,’’ he said.
