An economist has picked holes in the Central Bank of Nigeria’s (CBN) policy of increasing the Monetary Policy Rate (MPR) by 200 basis points, insisting that it ought to have been done incrementally and in a measured manner to achieve the desired result.
He highlighted that although inflation is elevated in the country, the CBN in taking decision should realise that the challenge currently facing the Nigerian economy is not just inflation but stagflation as such, it should equally have regard to growth concerns in future meetings of the Monetary Policy Committee (MPC).
Professor Uchenna Uwaleke, Director, Institute of Capital Market Studies, Nasarawa State University Keffi, while reacting to the MPC’s hike of the MPR to 24.75 percent said, “Much as tightening is necessary at this time in view of elevated inflation, MPC should tighten policy incrementally and in a measured manner that optimizes the CBN’s policy tool kit without undue reliance on the monetary policy rate.
“The decision by the MPC to increase the MPR by 200 bps makes it a total of 600 bps in just one month if one adds the 400 bps delivered in February.
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“This is in addition to a very high CRR of 45% representing sterilised Bank deposits.
“This development is now driving undue pressure by banks on the CBN’s Standing Lending Facility and increasing cost of funds generally.
“The CBN should recognise that the challenge currently facing the Nigerian economy is not just inflation but stagflation and to this end should equally have regard to growth concerns in future meetings of the MPC”.
Professor Uwaleke expressed concern that the CBN’s latest policy will increase the cost of funds, which may impact negatively on growth.
TheWitness
