By LOUIS IBA
The Central Bank of Nigeria (CBN) is stifling the growth of many businesses with its tight monetary policy, the Lagos Chamber of Commerce and Industry (LCCI) has said.
The LCCI, in a release on Wednesday, faulted the Central Bank of Nigeria’s monetary policies, noting that the apex bank was insensitive to the existing harsh economic conditions in the country in arriving at some of the policies.
The LCCI also held the CBN policies responsible for strangulating the Nigerian economy. The Monetary Policy Committee of the CBN, at its meeting of November 19 and 20, 2012, resolved to sustain monetary policy tightening. Consequently, the MPR was retained at 12 per cent, the CRR retained at 12 per cent and liquidity ratio retained at 30 per cent.
“The monetary policy committee’s decision to retain a regime of tightening is ill advised and insensitive,” said the LCCI. The LCCI, Nigeria’s Organised Private Sector consultative body, also said the CBN in taking some of its decisions failed to factor in the existing economic climate which it noted made it futile sustaining a tight monetary policy.
It listed such adverse economic conditions not factored in by the CBN to include: escalating unemployment crisis; declining profit margins; a weak consumer demand; prohibitive interest rates; decelerating economic growth and high mortality rate of small businesses.
“These conditions call for policy choices that would stimulate the economy, even at the risk of inflation. Boosting economic activities would increase output and invariably moderate inflation,” said the LCCI. The LCCI said while appreciating the concern of the CBN on Inflation, exchange rate stability and foreign reserves building however felt that given the present socio economic conditions, stimulating the economy should be paramount in its agenda.
The continuation of a tight monetary regime, the LCCI said, would have the following outcomes: persistence of high interest rate; deepening of the unemployment crisis; financial intermediation role of the banks will continue to be undermined; recovery of the real economy will remain sluggish; capacity of enterprises to create jobs would continue to be inhibited; stock market recovery would continue to be slow; just as the capacity of banks to support the economy would remain severely constrained.
Said the LCCI, “monetary policy decision should ideally be situated in the context of this reality; the interest of the larger economy and the welfare of the citizens.” “The ultimate aim of economic policy is to impact the lives of the people. Economic policies are not ends in themselves, but means to an end!
“The fiscal authorities also have a critical role to play in revamping the economy; but regrettably, the effectiveness of fiscal policy has been significantly weakened by corruption and pathetic institutional capacity.”