The retention of Monetary Policy Rate (MPR) at 14 per cent will increase inflation rate and the banking sector non-performing loans (NPLs) profile,’’ some financial experts said on Wednesday.
They told newsmen in Lagos that the retention of MPR was not in the best interest of the country, saying that it would escalate the inflation rate.
The experts spoke on the outcome of the Monetary Policy Committee (MPC) meeting held on Nov. 21 and 22 in Abuja. The MPC at the meeting retained the interest rate at 14 per cent and also retained the Cash Reserve Requirement (CRR) at 22.5 per cent. The liquidity ratio was also retained at 30 per cent. In his remarks, Dr Glenn Prince-Abbi, the Executive Consultant/Chief Executive Officer, Espera Global Corporation, said that the decision to retain all the key indicators was worrisome. According to him, it will increase inflation rate and worsen the present economic recession. Prince-Abbi said that reduction in the interest rate would improve the cost of doing business and boost companies profitability. He said that the headline inflation which was already at a ceiling breaking of 18.33 per cent would remain or even worsen with the MPC decision. “The action of the MPC to retain all the key indicators is worrisome. “It does appear to me that the Central Bank of Nigeria (CBN) believes ever so strongly that no form of actions on adjusting monetary policy instruments is needed to work in synch with the ongoing fiscal policy propositions by the government,” he said. Prince-Abbi wondered how the nation’s economy could get out of recession with high interest rate that determines the cost of money used in the production process. “How can we depend strictly and solely on fiscal policies to make the necessary adjustments and keep sacrosanct and untouchable fundamental monetary instruments,” he queried. According to him, the high interest rate regime which is retained has not allowed any form of reduction in the costs that producers are already contending with… Read more
Culled from Vanguard