At its first Monetary Policy Committee (MPC) meeting in 2017, the Central Bank of Nigeria (CBN), for the third consecutive time, retained its Monetary Policy Rate (MPR) at 14 percent. This is against calls by many stakeholders in the economy to cut the rate at which the apex bank lends money to commercial banks in the country.  The last time the MPR was changed was July 2016 when it was moved from 13 percent to 14 percent.    

But, defending the decision of the MPC to retain the MPR at 14 percent, the CBN Governor, Godwin Emefiele, said it was informed by the need to closely watch and re-assess the challenges that confronted the economy in 2016 and the opportunities that exist for economic recovery this year.                                                   

He acknowledged that CBN was “conscious of the prevailing market sentiments in favour of a rate cut”, but insisted that the committee came to the conclusion that most of its decisions last year were largely informed by the need to address the delicate balance between price stability and growth.                         

Emefiele further explained that the MPC, which is the highest policy making organ of the CBN, is concerned that the present economic challenges are not amenable to simplistic analyses and quick fixes as many seem to believe. He also admitted that the pressures on consumer prices were yet to abate amid the recession in the country.                                           

In addition to retaining the existing MPR, all other subsisting rates were also unchanged. These include the Cash Reserve Requirement (CRR), which is the amount that each commercial bank is mandated to keep with the apex bank. That remains at 22.5 percent, while the Liquidity Ratio also remains 30 percent. Also, the asymmetric corridor that has subsisted since July last year remains at +200 and -500 basis points around the MPR.

Through the use of the asymmetric corridor policy together with an active liquidity management strategy, monetary policy will be able to affect credit and deposit rates via different channels, and can be used to adjust credit spread as a macro-prudential policy tool.                                          

Altogether, we have closely followed key monetary policies of the CBN, especially since the economic recession set in last year. The insistence of the apex bank on retaining the MPR at 14 percent for three consecutive periods seems to fly in the face of compelling economic strategies that should lead to economic recovery.

The MPR rate at 14 percent, which appears to favour only the banks which now lend to customers at almost 30 percent, will not stimulate economic growth.  It is also contributory to the spiraling inflation that has significantly eroded the purchasing power of the people.                             

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We are concerned that the MPR may remain the same in the months ahead if the current forex scarcity is not decisively addressed. Experts say that even if CBN cuts interest rate, that may not necessarily achieve the desired effect until other monetary and fiscal policies are put in place.                                                     

All the same, lowering interest rate is of utmost importance now. That was the point of the disagreement between the Minister of Finance, Mrs. Kemi Adeosun, and the CBN last year. She had advised the CBN to lower interest rates to enable government and private sector operators to borrow at economically viable rates that could reflate the economy and jump-start growth. We support that position. Nigeria has one of the highest MPRs globally. In the United States, it is 0.5 percent; Australia, 1.75 percent; Britain, 0.250 percent; Canada, 0.500 percent, Chile, 3.25 percent and South Korea, 1.5 percent.                                                       

Though financial stability and the interest of foreign portfolio investors weighed heavily in the decision of the CBN, our concern is that the apex bank may not have taken into account the inflationary impact of the decision. Undoubtedly, higher interest rates damage fragile economies such as ours and do not encourage investment.          

We find it difficult to agree with the economic data on which the CBN based its decision. For instance, high interest rates become inevitable when the economy is nearing maximum employment and price stability, not the other way round when inflation and unemployment have reached an all-time high and many companies are facing tough times and    laying off workers.                                                                   

The challenges of our present economic reality require adequate injection of liquidity in the economy and reasonable interest rates so that business operators can obtain credit with ease.  Though we share the optimism that Nigeria will come out of recession this year according to forecasts by both the World Bank and the International Monetary Fund (IMF), we are doubtful that the current monetary policies of CBN are enough to end this recession.   

Already, the   recession is reducing the well-being of the people and increasing    insecurity in the country. Credible monetary and fiscal policies are needed to get the country out of recession. Let the current lending rate be reviewed downwards. That, for us, is the direction to go. 

No monetary compensation is adequate or can be a substitute for the loss of a loved one.  It is merely a gesture which may sometimes help dependants, in the short term, to cushion their material loss.  The earlier this is done, the better.  The NAF has said this incident is the first of its kind in the country.  May it also be the last.