22.75% interest rate ‘ll worsen economy – Obi

The presidential candidate of the Labour Party (LP) in the 2023 general elections, Mr Peter Obi, has criticised the recent decision of the Monetary Policy Committee (MPC) to increase the Monetary Policy Rate (MPR) to 22.5% and the Cash Reserve Ratio (CRR) to 45%, saying it will further worsen the economic situation of most Nigerians.

Obi in a series of posts on his X handle on Thursday said the hike in MPR also known as interest rate would be counterproductive as it would not address the intended purpose of managing money supply.

He cautioned that what the Nigerian economy needs now is hard-headed practical originality and results and that tinkering with classical economic theories can only deepen the crisis.

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“I am of the strong opinion that the recent decision of the Monetary Policy Committee to increase the Monetary Policy Rate, MPR, to 22.5% and the Cash Reserve Ratio, CRR, to 45% will further worsen the economic situation of most Nigerian households as it is bound to cause more job losses in the productive sector, especially manufacturing and other sectors that rely on bank loans and credit facilities for their funding needs.

“Tightening liquidity in the financial system does not improve productivity, i.e. food production, which is the major cause of inflation in Nigeria. Moreover, only about 12% of N3.6trn of the total money in circulation is in the banking system which means that 88%, about N3.2trn is outside the banking system,” he said.