Economic analysts set agenda as MPC meets Thursday

Economic analysts yesterday charged the Central Bank of Nigeria (CBN’s) Monetary Policy Committee (MPC) to hold all rates, citing the global crisis occasioned by coronavirus pandemic.

They gave the advice in separate interviews with the News Agency of Nigeria (NAN), in Lagos ahead of the MPC meeting scheduled for Thursday, May 28, 2020.

They said the pandemic and the sudden collapse of the international oil market, which at the moment appeared to be showing early signs of recovery, meant that the only option was to offer stimulus packages in the country.

Managing Director of BIC Consulting Services, Dr. Boniface Chizea, urged the committee to maintain the status quo ante.

“This is not the time tinker with interest rates as it is of no effect or Cash Reserve Ratio (CRR) or Loan to Deposit Ratio. The MPC meeting may just offer some advice to the CBN in view of rectifying what has been done so far.

“We learn that the reserves are bleeding profusely as the CBN defends the exchange rate, recalling that the rates were suddenly reduced by 18 per cent to 360.

“But since not much of activity is going through imports, scant attention has been paid to developments in this regard. So, we are in a global crisis and realistically, we expect bold decisions,” Chizea said.

In the same vein, a Political Economist, Martin Onovo, urged the MPC to lower interest rates, stressing, “As it is, inflation keeps rising and our foreign reserve has been dropping sharply.

“National debt has also risen sharply and Nigeria is clearly in a debt trap and heading to a debt crisis. Also, the Naira is loosing value sharply and the national economy is clearly ruined.

“Based on these, we expect the CBN to lower the interest rate in line with the stimulus package. But, this will have an almost insignificant effect, given the current national economic predicament,” Onovo said.

Besides, Director, Centre for Economic Policy Analysis and Research (CEPAR) University of Lagos, Professor Ndubisi Nwokoma, advised the committee agsinst lowering the Monetary Policy Rate (MPR), which is the interest rate at which CBN lends to commercial banks and other clients.

“The exchange rate is fragile with possibility of further depreciation of the naira. Oil revenue is dwindling and foreign reserves on the decline.

Inflation is on the increase and incomes are not rising for households.

“In view of this, CBN should not relax credit through the Deposit Money Banks (DMOs). Loosening credit through DMBs could lead to more pressure on the exchange rate and hence, further depreciation of the Naira. Hence MPR should not be lowered,” Nwokoma said.

However, he advised that greater focus should be on developing finance credit to stimulate the sectors through Small Medium Enterprises (SMEs), adding that SMEs had been hit hardest by the lockdown, border closure and macroeconomic uncertainties.

It would be recalled that the MPC retained all key policy rates in March amid the impact of COVID-19 on the global and Nigerian economy.

MPR, the controlling lending rate was left at 13.5 per cent, with the asymmetric corridor at +200/-500 basis points around it, while Liquidity Ratio was left at 30 per cent, and Cash Reserve Requirement (CRR) remained at 27.5 per cent.

In this article:
Central Bank of NigeriaMPC
Receive News Alerts on Whatsapp: +2348136370421

No comments yet