Experts support CBN’s decision to retain 11.5 percent interest rate

*‘The inflation is going to keep galloping because it is not the economic choices that are being made that are affecting the economic conditions but the political choices’

Isola Moses | ConsumerConnect

Sequel to the Bank’s recent decision to retain the Monetary Policy Rate (MPR) at 11. 5 percent, economic and financial experts have supported the decision of the Monetary Policy Committee of the Central Bank of Nigeria (CBN) to retain all monetary policy parameters, including the benchmark interest rate.

ConsumerConnect had reported the MPC at the end of its two-day meeting that the Monetary Policy Rate said that it would remain unchanged at 11.5 percent.

Similarly, the Cash Reserve Ratio and Liquidity Ratio would be held constant at 27.5 percent and 30 percent respectively.

The CBN has disclosed the decision is a strategic move to allow the necessary stability for monetary policy objectives along with other parameters to come to fruition in the Nigerian economy.

Mr. Godwin Emefiele, Governor of CBN, announcing the Committee’s decision in Abuja, the CBN Governor, said: “The MPC believes that the existing parameters have supported the growth recovery and should be allowed to continue for a little longer for consolidation to achieve the committee’s mandate of price stability conducive for growth.

“Therefore, by unanimous vote, the MPC voted as follows: retain MPR at 11.5 percent; retain the asymmetric corridor of +100/-700 basis points around the MPR; retain the CRR at 27.5 percent; and retain the Liquidity Ratio at 30 percent.”

The committee, he noted, expressed several concerns about shifting the rates, adding that while tightening the parameters would significantly reduce inflation, it would also increase the cost of funds and constrain output growth.

Emefiele said: “On the other hand, whereas loosening will lower policy rate, ease liquidity pressure and stimulate additional credit creation, which will boost output growth, MPC also thinks that loosening will further widen the negative real interest rate gap and compound the price distortions in the money market which could fuel inflation pressures.”

The MPC has retained the monetary parameters for 14 consecutive months, report said.

The last time the monetary policy rate was reviewed was September 2020, when the Bankers’ Bank reduced it from 12.5 percent to 11.5 percent while maintaining all other parameters.

The CBN Governor also noted that the continued security challenge across the country remained a major source of concern for members, besides its impact on business confidence, foreign investment inflows and overall economic activities.

CBN’s decision on MPR in line with expectation, say experts

Experts have commented the CBN latest decision to retain the MPR at 11. 5 percent.

In respect of the latest development, Akpan Ekpo, a Professor of Economics and Public Policy at the University of Uyo (UNIUYO), said he was not surprised by the decision of the apex bank, The Punch report said.

Prof. Ekpo stated that there was no need to revise the rates as inflation rates had been trending downwards.

The scholar noted: “The outcome is in line with what I was expecting because inflation is trending downwards, so there is no need to revise the MPR, and the economy is on a recovery trajectory. I expect the CBN to review the rates in the next quarter.”

Dr. Muda Yusuf, immediate past Director-General of the Lagos Chamber of Commerce and Industry (LCCI), also agreed to the CBN’s position on the rate, as he stressed the need for impactful interventions by the fiscal authorities.

Yusuf stated: “I agree with the outcome given the prevailing economic conditions. I also like the fact that there was a lot of emphasis on what the fiscal side should do around issues of promoting public-private partnership, issues of security and things like that and the role of government in exports.’

In his remarks on the CBN’s, Prof. Pat Utomi, an economist and former  was quoted to have said: “It doesn’t really matter whether the monetary authorities are going to decide to increase or reduce the rates because nobody is borrowing money anyway because they is no money to lend to the creditor.

“The inflation is going to keep galloping because it is not the economic choices that are being made that are affecting the economic conditions but the political choices.”

Dr. Sam Nzekwe, erstwhile President, Association of National Accountants of Nigeria (ANAN), said he did not expect the rates to be changed.