Retention Of MPR By CBN Was Expected – Economists

Some economists said, on Tuesday in Lagos, that the decision by the Monetary Policy Committee of the Central Bank of Nigeria (CBN) to retain all Monetary Policy Rates, MPR, was right.

The experts told the News Agency of Nigeria (NAN) in separate interviews that the outcome of the meeting was expected as inflation was still double digits.

NAN reports that members unanimously voted to retain MPR at 11.50 per cent, asymmetric corridor at +1 per cent/-7 per cent, CRR at 27.50 per cent and liquidity ratio at 30 per cent.

Akpan Ekpo, a professor of Economics and Public Policy at the University of Uyo, Akwa Ibom, said the apex bank did the right thing.

“I had predicted the outcome. Let fiscal and investment/structural policies be sustained to propel the fragile recovery.

“Inflation though declining is still double digit, hence the MPR cannot be increased to fight inflation,” he said of the CBN decision.

Moreover, he explained that the exchange rate had impacted on the inflation rate, and that it was better for the CBN to intervene via its development functions.

“However, there is still inconsistency between savings and investment since the real interest rate is negative, yet the system is not awash with liquidity,” he said.

He advised that with the high rate of unemployment, it was crucial for the apex bank to enhance growth by supporting the real sector.

Ekpo urged that the security situation in the country be addressed to attract new investments, noting that the present state of the economy what was needed was unconventional monetary policy.

In the same vein, Prof Ndubisi Nwokoma, Director, Centre for Economic Policy Analysis and Research (CEPAR), University of Lagos, said the decision was good.

“I saw it coming. The impression created before now by the CBN is that focus would be on economic growth more, relative to price stability.

“The retaining of MPR at 11.5 per cent with an asymmetric corridor suggestive of making credit easier to get is a focus on sustaining the recent positive quarterly economic growth figures.

“In any case, the National Bureau of Statistics figures for the last two monthly releases for inflation have been trending downward,” he said.

Hassan Oaikhenan, Professor of Economics at the University of Benin, Benin-City, however, said the committee’s decision to retain all parameters was bad.

“In my view, a high interest rate and a collapsed exchange rate is a toxic combination of rates that serves firms and businesses and, indeed, the economy no good,” Oaikhenan said.

He said the decision to retain the MPR at 11.5 per cent was ostensibly borne out of the need to maintain the stability that the economy had been able to attain. (NAN)

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