Financial experts have urged the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to collaborate with the Federal Government on policies that will impact positively on the economy.
The experts spoke on Friday in Lagos against the backdrop of the 275th MPC meeting slated for Sept. 21 and 22 in Abuja.
They said that monetary and fiscal policies must align to grow businesses and attract investments into the country.
Mazi Okechukwu Unegbu, a former President, Chartered Institute of Bankers of Nigeria called on MPC to engage fiscal authorities on Value Added Tax (VAT) reduction currently at 7.5 per cent.
Unegbu observed that VAT needed to be reviewed in line with economic realities caused by COVID-19 pandemic.
He noted that VAT increment was affecting both small and big businesses in the country.
“Increasing tax is not the best way to help this economy, because when the tax rate is high, employers will sack people from their jobs.
“When the tax is reduced, you will see increase in productivity, more tax returns and more employment.
“Central Bank of Nigeria should work with the fiscal section for their own policies to work because when CBN makes a policy that is contrary to the fiscal policy, it will not make any headway,” he said.
Unegbu said that challenges in the monetary system were huge and should be addressed beyond provision of palliatives for banks by CBN.
According to him, the increase in VAT which has affected all other taxes; also, CBN should consider helping the banks further as COVID-19 has further disrupted liquidity of banks across the system.
He said that the recent increase in electricity tariff when there was no stable power, should be addressed.
Adebayo Adeleke, former General-Secretary, Independent Shareholders Association of Nigeria said that the committee should find ways to ensure that the country did not plunder into recession.
Adeleke told NAN that CBN should lower interest rates on borrowing, which would encourage people to restart their businesses.
“The committee should be looking at ensuring the continuity of policies that will not drive the country into recession.
“What CBN has done so far is to try as much as they can to discourage savings by lowering interest rate.
“There are two legs to it, if you lower interest rate so that people do not bring their money and dump in the bank, is because you want more money in circulation in the economy.
“The next leg is that we lower interest so that we can inflate the economy. The economy has taken a downturn because of COVID-19; a lot of businesses have been affected.
“So if you are closing the gate to deposit or by discouraging people with the lower interest rate, then we should lower the interest on borrowing.
“Interest on loan should be lowered. That will also encourage people to take more money to restart their businesses because we need to bring the economy back on stream,” he said.
Adeleke said he would be expecting to see more deliberations on how businesses could access more funds, which he believed was a major expectation of the general investing public.
Mallam Garba Kurfi, the Managing Director, APT Securities and Funds Ltd. said that he would be expecting CBN to maintain the current rates of the interest rate, cash reserves ratio among others.
Kurfi said that the committee should consider maintaining the rate on treasury bill, which will attract banks to lend out money to businesses.
“If you want to push the economy upward, you need to have lower interest rate in terms of borrowing.
“Treasury bill should be low to attract banks to lend out their money because if you remember in 2016 when the treasury bill was 15 to 16 per cent, banks took all their money to buy treasury bill and could not lend which affected the economy.
“What I expect CBN to do is to likely maintain the rates on MPR, treasury bill and others; the MPC meeting taking place next week will see that most of the rates remain the same.
“The threshold of three to four per cent above the MPR will also remain the same, NPR and the cash reserve ratio will remain the same, that is my anticipation,” he said.
Kurfi said that devaluation of naira was another challenge to be tackled but envisaged that CBN would continue to intervene at least with the bureau de change to bring down the price of dollar.
He said that before CBN intervention, dollar was trading in the parallel market at N470 but now less at N450 or N445.
He expressed optimism that the upward price change of petrol would encourage establishment of new refineries and attract investors once the price is right.
