By Aliyu DANLADI
Some economic experts have said that the Monetary Policy Committee (MPC) will retain the current monetary policy rates in spite of the rising inflation.
The inflation rate rose from 11.14 in July to 11.23 per cent in August.
The MPC will be having its 263rd meeting in Abuja from Sept. 24 to Sept. 25.
The MPC is the highest policy making committee of the CBN and its mandate is to review economic and financial conditions in the economy to determine appropriate monetary policy rates in the short to medium-term, among others.
The Chief Executive Officer, Global Analytics Consulting Mr Tope Fasua, said the MPC would likely retain the current monetary rates in spite of the rising in inflation to enable it further study the economy.
“I don’t think it’s wise for them to increase the MPR.
“I know that they (MPC) are thinking of doing that because money in circulation has increased, but I think that it has only increased among a certain circle of people.
“Among the masses, nothing has changed. A lot of people are still being owed salaries and yes even though politicians are spending, it is among the top politicians.
“What goes down to the masses is not more than N2, 000 to N5, 000 and it’s not enough to cause further inflation. So for this reason, I’ll say they should watch for a while,” he said.
Fasua said that if the MPC should increase the benchmark Monetary Policy Rate (MPR), commercial banks were likely to also increase lending rates to businesses which would in turn increase the number of non-performing loans.
The Head of Department, Banking and Finance, Nassarawa State University, Prof. Uche Uwalekesaid was not expecting any change in the policy rates at the next meeting of the MPC.
“There is interest rate hike in the U.S. which is triggering capital flows out of Nigeria and leading to a drop in external reserves.
“There is also the threat on crude oil price volatility from US-China trade war and reversal in downward trend in inflation.
“There is also labour’s demand for minimum wage implementation, increasing FAAC allocation and rising pre-election spending,” he said.
Uwaleke said that the MPC would likely retain the monetary rates to avoid unpopular policies with the approach of 2019 general elections.
The Financial Derivatives Limited (FDC) Mr Bismarck Rewane said the decision of the MPC could either make or mar the current economic situation.
“The decision making process will be particularly difficult given the backdrop of rising consumer prices, depleting external reserves and potential exchange rate pressure
“Political uncertainties are also affecting investor confidence in the Nigerian economy.
“As the build up to the 2019 general election intensifies, investors are liquidating their portfolios, resulting in a 9.76 per cent decline (quarter-on-quarter) in foreign portfolio inflows into Nigeria in the second quarter,” he added.
The MPR is the anchor rate at which the CBN, in performing its role as lender of last resort, lends to banks to control liquidity in the economy.
If the apex bank intends to increase the level of liquidity in the economy, it reduces the MPR, but increases it when it intends to tighten money supply.
The MPR is currently at 14 per cent, Cash Reserve Ratio at 22.5 per cent and Liquidity Ratio is at 30 per cent.
The Asymmetric corridor
