Economist advises MPC to relax monetary policy in 2018

An economist, Sheriffdeen Tella, has advised the Monetary Policy Committee (MPC) of Central Bank of Nigeria (CBN) to relax the monetary policy by lowering bank lending rates in 2018.
A professor of economics at Department of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun, Tella, gave the advice in an interview with the News Agency of Nigeria (NAN), on Wednesday, in Lagos.
He said that a downward review of the Monetary Policy Rate (MPC) was imperative to make borrowing cheaper for the manufacturing sector.
The MPC is the rate at the CBN lends to banks, it is the nominal anchor of bank lending rates.
Tella said the country had, in the last two years, witnessed restrictive or contractionary monetary policy, but needed to relax the rates now.
He said lower bank lending rates would boost investments in long-term financial instruments, as well as the capital market.
Tella said the apex bank should expect increased spending this year, being an election year, stressing that politicians would keep the economy awash with money, especially those kept outside the banking system.
He said that politicians might not borrow to finance the election, but dig into their home vaults.
According to him, such money cannot be controlled by the CBN and would be spent towards the 2019 elections.
Tella said that the apex bank should introduce a policy that would direct bank credit to production of goods in manufacturing, agriculture and mining and other productive activities.
He said that this would go a long way to generate long-term employment in anticipation of increased money supply.
“With oil price rising, though temporarily, monetisation of the oil proceeds should be done with caution.
“So, moderate increase in money supply is expected, but such increase should be directed to specified productive sectors of the economy,” he said.
Tella advised that the CBN should continue to strengthen the naira against key currencies to keep the price of imported raw materials stable or low.
“This will invariably keep domestic price of goods low and affordable,’’ he said.
NAN reports that the MPC is expected to hold its first meeting in the year on January 22 and January 23, according to the old schedule.
The CBN, however, is yet to release the MPC meeting schedule for the year, casting doubt over the possibility of meeting anytime soon.
Membership of the MPC has already been depleted below the tolerable level of six members recommended to form a quorum.
The committee was established under the CBN Act of 2007.
The MPC is the think tank of CBN that formulates monetary policies to attain key objective of price stability.
The committee has met regularly every other month and for six times in a year since it was inaugurated.