Ahead of the press briefing by the Monetary Policy Committee of the Central Bank of Nigeria (CBN) today, finance experts say the committee may likely hold all parameters constant.
President of the Association of Capital Markets Academics of Nigeria (ACMAN), Prof. Uche Uwaleke, while speaking to Daily Trust said conventional practice and the easing of inflation are major reasons why the MPC of the CBN will maintain the rates.
“The MPC is likely to hold all parameters when the members meet this week for two reasons:
One, historical evidence suggests that the MPC seldom adjusts policy rates in January due to the need to allow the markets to stabilise in the new year.
Secondly, inflationary pressure is beginning to reduce as seen in headline inflation numbers for month of December 2022 not only in Nigeria but also in the US,” he said.
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Uwaleke further advised that the monetary rates should not be further hiked, as doing so beyond the current high rate of 16.5%, is capable of jeopardising economic growth.
Corroborating Uwaleke’s viewpoint, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said he expects the MPC to maintain rates owing to the current economic realities.
He said: “I expect them to maintain the status quo because the rates are already extremely high. CRR is 32.5 per cent while MPR is already high at 16.5 per cent
Yusuf noted that these are among the highest rates in the world. “It means that for every N100m deposit the banks make, CBN takes N32,5 million. So how will they function? How will they give credit?” he queried.
“These are extremely high. Interest rate in the economy now is very, very high. And it is not as if further tightening of monetary policy will make any significant difference in inflation rate. So it is the real sector and other investors that have been suffering the hike in interest rate,” he noted.
You can see what is happening globally. The IMF, World Bank have been cautioning central banks to moderate their rate hikes because of the negative effect it is having on economic growth and recovery,” he said.
Dr. Yusuf further stated that Businesses are already suffering from scarcity of forex, high cost of diesel and other macroeconomic challenges, as such, it will be unfair to compound their problems.
“So, it will be most unfair to now to compound it with the problem of high interest rate.
On the slight decline in inflation rate recorded last month, from 21.47 percent in November to 21.34 percent, Yusuf, a former Director-General of the Lagos Chamber of Commerce, said he expected the downward trend to continue, noting however that it was just a “marginal drop”.
He said tightening of interest rates would not help the investors. “So, if you cannot help the investors (by lowering interest rates), just leave them the way they are,” he said.
