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Experts laud MPR retention, amid inflation, COVID-19 effect

Financial experts on Wednesday said retention of the interest rate by the Monetary Policy Committee (MPC) was not unexpected, in view of the rising inflation and raging impact of COVID-19.

They spoke in Lagos on the outcome of March MPC meeting of the Central Bank of Nigeria (CBN), which ended on Tuesday.

The committee, at the end of the meeting, resolved to retain the Monetary Policy Rate (MPR) at 13.5 per cent and to hold all other policy parameters constant.

The committee voted to retain the asymmetric corridor of +200/-500 basis points around the MPR, and the Cash Reserve Ratio (CRR) at 27.5 per cent.

It also retained the Liquidity Ratio at 30 per cent.

The CBN Governor, Mr Godwin Emefiele, who read the communique at the end of the meeting, said the decision of the committee to retain the controlling rates was informed by the need to observe the impact of steps already taken under a massive intervention plan to save the economy from COVID-19 pressures.

“Any attempt to adjust the monetary policy fundamentals in any direction – upwards or downwards – will distort and undermine the effort already made through the recent N3 trillion stimulus plan by the Central Bank,” Emefiele said.

He said the impact of COVID-19 was not only capable of plunging the world into a health crisis, but also instigating a major economic crisis.

In his reaction, Prof. Sheriffdeen Tella, of the Olabisi Onabanjo University, Ago-Iwoye, Ogun State, said the committee retained all rates due to rising inflation.

Tella, a professor of economics, said that fears of further rising prices after exchange rate adjustment made the committee to retain all rates.

“It implies the CBN wants to rely on its direct credit intervention at predetermined interest rate, realising that banks hardly obey its directives,” he stated.

Tella said the intervention fund must be timely, adequate and highly monitored to ensure it gets to the designed target with appropriate safety net.

Also speaking, Mr Ambrose Omordion, the Chief Operating Officer, Inve stData Ltd., welcomed the outcome of the meeting.

“The outcome of MPC meeting was in line with our expectations in Investdata, considering the ravaging impact of coronavirus outbreak on the global economy,” Omordion said.

He explained that the recent naira adjustment and provision of intervention funds at lower rates by the apex bank would push prices of goods in the months ahead.

“On this note, inflation is expected to move higher and MPR cannot be reviewed downwards but rather up if inflation hits 13.5 per cent.

“Leaving the monetary instrument unchanged is just to watch as things play out, especially with all these intervention moves and measures,” Omordion said.



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