MPR increment will dissuade investors — Experts

…Predicts further fall in equities

By ODUNEWU SEGUN

WITH the decision of CBN’s Monetary Policy Committee to hike Monetary Policy Rate from 11 per cent to 12 per cent barely three months after it reduced it from 13 per cent to 11 per cent, financial experts have argued that the hikewould discouraged more people from investing in the capital market.

While reacting to the decisions, Mallam Garba Kurfi, Managing-Director, APT Securities and Funds Ltd., said that the decision would further compound the challenges being faced by the market ranging from foreign exchange issues and instability in economic policies.
According to him, the more government tried to tighten the economy, the more inflation increased.

The CBN at the MPC meeting of March raised the interest rate to 12 per cent from 11 per cent as a response to the increase in inflation recorded in February. It also increased the Cash Reserve Ratio (CRR) to 22.5 per cent from 20 per cent in a bid to tighten money supply.

Okechukwu Unegbu, a former President of Chartered Institute of Bankers of Nigeria (CIBN) explained that the hike would lead to further depreciation in the capital market due to lack of liquidity.

According to him, increment in the MPR would depress activities at the nation’s bourse, adding that capital market would continue to battle with its current challenge because the hike in interest rate would lead to more movement of fund from the market to the money market.

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Unegbu disclosed that with the decision, there would be no actual investment, and that this would lead to rise in unemployment rate and scarcity of funds to the real sector of the economy. He explained that the manufacturing sector will be worst because more Small and Medium Enterprises (SMEs) will find it difficult to access funds.

He said that the outcome of the meeting would compel Nigerians to look inwards at ways to salvage their businesses with the current challenges of the economy.

An Abuja based Development Economist; Katch Ononuju with the decision, the CBN has left the main problems of Nigerian economy by trying to deceive members of the public through movement of figures.

“The announcement does not have any positive impact on the economy, let’s go more practical, we are an import depended country, our exports has declined significantly, we don’t have the incentives that are needed, our people are looking for jobs, the naira is crashing. Look at our Gross Domestic Product, GDP, growth rate we are still struggling between 2-3 percent.

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“Am disappointed, the figures they paraded do not have any bearing with the poor, what are we saying? Allow the naira to find its free flow, remove the subsidy, just yesterday the National Assembly approved N150 billion for subsidy payment, yet they said there is no subsidy on Premium Motor Spirit, PMS.

“These are the critical things we should be looking at, not moving figures from one base point to another which practical has no effect on the Nigerian economy.