MPC meeting: Experts urge CBN to halt interest rate hikes as inflation eases

Ahead of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting, financial experts are calling for a pause on interest rate hikes to stabilize Nigeria’s fragile economy.

The MPC is set to meet on Monday and Tuesday to review critical monetary policies, including the interest rate, a topic that has sparked widespread debate.

Professor Uche Uwaleke, financial economist and Director at the Institute of Capital Market Studies, Nasarawa State University, emphasized the need to hold off on further rate increases.

Citing the recent moderation in inflation, Uwaleke argued that maintaining the current rates would better support economic stability.

“Given the easing inflation in July and August, the MPC should completely pause rate hikes,” he said, adding that the adverse effects of high interest rates are becoming evident in an economy grappling with stagflation.

Uwaleke also pointed out that global central banks, like the U.S. Federal Reserve, have paused or cut rates, with others like the Bank of England expected to follow suit. He encouraged the MPC to explore alternative, unconventional tools to control money supply instead of relying solely on the Monetary Policy Rate (MPR).

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Echoing Uwaleke’s views, Professor Anthony Kila, a political economist and public affairs analyst, stressed that the MPC’s decisions should have a more direct impact on the lives of ordinary Nigerians.

Kila, who also teaches at the Commonwealth Institute of Advanced and Professional Studies, criticized the current framework, noting it doesn’t resonate with the realities faced by most citizens.

“In Nigeria, the foreign exchange rate, rather than the interest rate, has a far more direct impact on people’s lives,” Kila remarked, urging the CBN to review how inflation and economic growth are measured.

Kila also advocated for policies that support consumer finance and called for fiscal measures to play a more prominent role in economic management.

In recent months, the CBN’s MPC has maintained a tightening stance on monetary policy, raising the interest rate to 26.75 per cent in July 2024, up by 50 basis points from 26.25 per cent.

The Cash Reserve Ratio (CRR) for deposit money banks was set at 45 per cent, while that of merchant banks remained at 14 per cent, with the liquidity ratio pegged at 30 per cent.

MPC Chairman Yemi Cardoso defended the July hike, citing inflationary pressures and the need to stabilize the foreign exchange market.

However, recent data from the National Bureau of Statistics (NBS) shows that Nigeria’s headline inflation rate eased to 32.15 per cent in August, down from 33.40 per cent in July, marking the second consecutive monthly slowdown.

Analysts are hopeful that this trend could influence the MPC’s decisions, with a growing call for a pause in rate hikes to alleviate pressures on economic growth.