By Lydia Ngwakwe
Lagos, May 27, 2021 Economists have continued to commend the decision by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), to retain the Monetary Policy Rate at 11.5 per cent.
The experts made the commendations in separate interviews with newsmen on Thursday in Lagos.
The MPC of the CBN voted unanimously to retain the Monetary Policy Rate (MPR) at 11.5 per cent.
The CBN Governor, Godwin Emefiele, said this on Tuesday, while reading the communique at the end of the MPC meeting.
The highlights of the committee’s decision were: MPR retained at 11.50 per cent, the asymmetric corridor of +100/-700 basis points around the MPR, the CRR was retained at 27.5 per cent, while Liquidity Ratio was also kept at 30 per cent.
The MPR is the benchmark against which other lending rates in the economy are pegged and is usually used as an instrument to moderate inflation in the economy.
Hassan Oaikhenan, a professor of Economics, University of Benin, said the committee’s decision was commendable.
“The decision is commendable only to the extent that investors who are able to borrow at the retained rates and who may base their expectations on a possible hike in the rates should they decide to seek additional credit to finance their businesses may heave a sigh of relief from the fact that rates have at least remained the same.
“It will be of little cheer to other potential borrowers who had found the interest rate prohibitive in the first place,” Oaikhenan said.
He said, however, that it would had been more appropriate for the monetary authority to effect a downward adjustment in interest rate.
Oaikhenan noted that a downward adjustment in interest rate would had been more appropriate with challenging operating environment, characterised by infrastructural deficit, high and rising inflation rate.
In light of this, he said, the likelihood of the retention of the interest rates by the MPC making the desired impact of revving up the tempo of activities in the economy was rather not important.
According to him, it will neither engender increased investment nor increased consumer spending, two macroeconomic variables that are critical to domestic production and ultimately, economic growth.
Akpan Ekpo, professor of Economics and Public Policy, University of Uyo, said the committee took the right decision by retaining the MPR at 11.5 per cent.
“The MPC has taken the right decision by allowing fiscal and investment policies to drive the recovery which has been sluggish and fragile.
“Inflation is quite high, hence, it will not make sense to raise the MPR to fight inflation,” Ekpo said.
He said, however, that the real interest rate was negative, signaling inconsistency between investment and savings.
Ekpo urged the apex bank to continue with its unconventional monetary policy as well as its intervention role to sustain economic recovery.
He also advised that the implementation of the economic sustainability plan and other structural initiatives such as that of poverty reduction should continue unabated.