Financial economists said on Tuesday that the decision by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), to raise Monetary Policy Rate (MPR), did not meet their expectations.
The experts said that they expected the committee to retain a hold on rates due to the recent cash crisis caused by the redesigning of the new banknotes.
The MPC at the end of its two-day meeting in Abuja, unanimously voted to increase the benchmark interest rate by 50 basis points to 18. per cent.
The CBN Governor, Mr Godwin Emefiele, while reading the communiqué of the meeting on Tuesday, said the Committee voted to keep the asymmetric corridor at +100 and -500 basis points around the MPR.
The MPC also retained asymmetric corridor at +100 and -500 basis points around the MPR.
MPR is the interest rate at which CBN lends to commercial banks; it therefore serves as benchmark against which other lending rates in the economy are pegged.
A raised MPR signals to commercial banks to accordingly hike their interest rates on loans/advances to their customers, and vice versa.
The MPR has been on the rise since April 2022, when it was 11.50 per cent.
Emefiele said that the slight increase was to moderate the effect of inflation and other economic issues.
A professor of Capital Market, Nasarawa State University, Keffi, Uche Uwaleke, expected the MPC to maintain a hold position on rates and signal a pause to policy tightening.
He said, “this is necessary to stimulate economic growth already hampered by the recent cash crunch.
“Headline inflation rate may have risen marginally in February when viewed year on year.
“But, it actually dropped by 0.16 per cent month-on-month and so by implication, inflation rate dropped between January and February this year. Against this backdrop, retaining policy rates stand to reason.’’
Akpan Ekpo, a professor of Economics and Public Policy at the University of Uyo, Akwa Ibom, wished the MPC had postponed the meeting because of the prevailing environment.
He said, “ i wish it was possible to postpone the MPC meeting because of the prevailing environment.’’
Ekpo said that raising the rate would not help the current situation because the factors driving inflation was multifaceted, mainly structural.
