Financial economists have continued to commend the decision taken by the Monetary Policy Committee of the Central Bank of Nigeria (CBN), to retain Monetary Policy Rate (MPR) at 11.5 per cent.
The experts made the commendations in Lagos.
The Monetary Policy Committee of the CBN voted unanimously to retain the Monetary Policy Rate (MPR) at 11.5 per cent.
Th CBN Governor, Godwin Emefiele disclosed on Tuesday, while reading the communique at the end of the MPC meeting.
The highlights of the committee decision are: MPR retained at 11.50 per cent, the asymmetric corridor of +100/-700 basis points around the MPR, the CRR was retained at 27.5 per cent, while Liquidity Ratio was also kept at 30 per cent.
MPR is the interest rate at which CBN lends to the commercial banks. The MPR is the benchmark against which other lending rates in the economy are pegged and is usually used as an instrument to moderate inflation in the economy.
Prof. Hassan Oaikhenan, a Professor of Economics, University of Benin, Benin City, said the committee’s decision was commendable.
“The decision is commendable only to the extent that investors who are able to borrow at the retained rates and who might base their expectation on a possible hike in the rates should they decide to seek additional credit to finance their businesses may heave a sigh of relief from the fact that rates have at least remained the same.
” It will be of little cheer to other potential borrowers who had found the interest rate prohibitive in the first place,” he said.
Oaikhenan said however, that it would have been more appropriate for the monetary authority to effect a downward adjustment in interest rate, as a way of attenuating the deleterious effects of the enormous challenges, arising from the hostile macroeconomic environment, that stand in the way of businesses in the country.
He said given the strangulating operating environment, characterized by acute infrastructural deficit, high and rising inflation rate, collapsed exchange rate, strangulating fiscal regime, characterized by all kinds of taxes and levies, a downward adjustment in interest rate would have been more appropriate.
In light of this, he said that the likelihood of the retention of the interest rates by the MPC making the desired impact of reviving up the tempo of activities in the economy was rather not important.
According to him, it will neither engender increased investment nor increased consumer spending, two macroeconomic variables that are critical to domestic production and ultimately, economic growth.
Prof. Akpan Ekpo, Professor of Economics and Public Policy, University of Uyo, said the committee took the right decision by retaining MPR at 11.5 per cent.
“The MPC has taken the right decision by allowing fiscal and investment policies to drive the recovery which has been sluggish and fragile. Inflation is quite high, hence, it would not make sense to raise the MPR to fight inflation.
He said however, that the real interest rate was negative signalling in consistency between investment and savings.
Ekpo urged the apex bank to continue its unconventional monetary policy as well as its intervention role via its development functions.
He also advised that the implementation of the economic sustainability plan and other structural initiatives such as that of poverty reduction should continue unabated.
