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How economists see CBN MPC decision

Economists on Tuesday expressed their views on the Central Bank of Nigeria Monetary Policy Committee (MPC) decision to hold the Monetary Policy Rate (MPR) at 11.5 per cent, and all other parameters constant.

They spoke in separate interviews in Lagos.

The MPC, at its 282nd meeting, had again voted to hold MPR at 11.5 per cent.

Reading a communiqué after the committee’s meeting on Tuesday, Mr Godwin Emefiele, the CBN Governor, said the MPC also unanimously agreed to hold all other monetary policy parameters constant.

The Asymmetric Corridor was thus retained at +100 and -700 basis points around the MPR, the Cash Reserved Ratio (CRR) at 27.5 per cent and the Liquidity Ratio at 30 per cent.

Emefiele said the parameters were retained to sustain the growth of the economy.

Prof. Akpan Ekpo, Chairman, Foundation for Economic Research and Training, Lagos, said the MPC decision met his expectations.

“Inflation is trending downwards, hence, no need to increase the MPR. The high food inflation rate is mainly due to decreased production as a result of insecurity.

“Nonetheless, the huge amount of intervention in almost all sectors seems not to have the desired impact – why? Economic agents are complaining of access to the various intervention funds.

“Also, the MPC would have reaffirmed its policy of managed float regarding its foreign exchange rate regime to counter the IMF position of a market clearing exchange rate.

“I am glad that the MPC reaffirms the need for fiscal and investment policies to continue to drive recovery. This would support monetary policy and accelerate job creating growth,” Ekpo said.

Uche Uwaleke, Professor of Finance and Capital market, Nasarawa State University, Keffi, also said the committee’s decision met his expectations.

“That was the right decision in view of the prevailing circumstances. The twin challenge of fragile economic growth and high inflation rate makes further tightening or loosening of monetary policy undesirable,” he said.

Sheriffdeen Tella, a Professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State said that he was not expecting any change in any of the parameters.

“I wasn’t expecting any change in any of the parameters because nothing serious has changed in terms of macroeconomic fundamentals.

“However, I would have liked to see the MPR reduced as signal for fall in cost of borrowing to encourage investors, particularly with massive depreciation of the naira which has pushed up cost of importation of raw materials and spare parts of industrial inputs,” he said.

The Director, Centre for Economic Policy Analysis and Research (CEPAR), Prof. Ndubuisi Nwokoma, however, did not see the committee’s decision meeting his expectations.

“I guess the Committee is satisfied that with inflation under containment as shown in the latest NBS figures, that growth can be sustained with the current level of the MPR and other indicators.

“Yes, the issue of exchange rate is very critical but it appears the forces at work in the foreign exchange market may go beyond economics.

“That is probably why round tripping has been difficult to manage, given the wide margin between the official and the parallel market rates.

“The MPC, in my opinion, may find it difficult to make significant difference here,” he said.

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