Financial experts have urged the Central Bank of Nigeria (CBN) to hold the prevailing Monetary Policy Rates (MPR) as tightening may not tame Nigeria’s inflationary trends.
The Monetary Policy Committee of the CBN commenced its two-day meeting on Monday to determine effectiveness or ineffectiveness of the Monetary Policy Rates which was increased at the last meeting.
It was reported that the MPR is the benchmark interest rate that guides all other rates in the financial market. The MPC had raised the MPR by 100 basis points from 13 percent to 14 percent in its last meeting in July.
Professor of Economics in Nasarawa State University, Uche Uwaleke said while an increase in rate is most likely considering the rising inflation rates across the globe, he urged the MPC to hold the prevailing rates constant as tightening may not tame inflationary trends
“Aside from inflationary pressure and the need to tame it, the MPC will be considering current global monetary developments such as the hike in policy rates by central banks in developed countries.
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“For example, the U.S. Federal Reserve recently increased the benchmark rate by 75 basis points while the Bank of England increased by 50 basis points,’’ he said.
Uwaleke said that monetary tightening by the central banks of the U.S. and the UK continued to trigger capital outflows from Nigeria with negative implications on the exchange rate.
“Further policy tightening may not tame inflationary pressures that are stemming more from the high cost of energy and negative impact of insecurity on food output.
“Given the current tepid real GDP growth, I will advise the MPC to maintain the status quo and give more time to the current CBN monetary policy to permeate the economy,’’ he said.
In his own submission, Dr. Tope Fasua, an economist, also urged the MPC to retain the subsisting rates as past rate increases had not tamed inflation.
“Though I expect that they may further raise rates, my advice to the MPC will be that they hold rates. We have raised rates by 250 basis points in the last two meetings but inflation has surged further.
“This means that our inflation is not tightly linked with interest rates and may recede in its own time,” he said.
According to Fasua, raising rates further will only be a continuation of punishment for local industries that borrow locally and are struggling to achieve previous levels of productivity post-COVID-19.
Similarly, past President of the Chartered Institute of Bankers of Nigeria (CIBN), Mr. Okechukwu Unegbu, urged fiscal and monetary authorities to look beyond the MPC and work together to save the economy from negative external influence.
He particularly decried the negative effect of the Russian-Ukrainian conflict on the Nigerian economy and called for policies and decisions that could insulate the Nigerian economy from such incidents.