Economy

Financial experts laud CBN for retaining MPC at 11.5 per cent

Economists said on Friday in Lagos during an interview with NAN that the decision by the Monetary Policy Committee (MPC) of the CBN to retain Monetary Policy Rate (MPR) at 11.5 per cent alongside other parameters was expected.

MPR is the interest rate at which CBN lends to commercial banks. It is the benchmark against which other lending rates in the economy are pegged.

It is usually used as an instrument to moderate inflation in the economy.

The experts said  that the retention would allow the CBN to continue to stimulate economic growth.

The MPC met on Monday and Tuesday and voted unanimously to retain the MPR at 11.5 per cent; it retained the Cash Reserve Ratio and Liquidity Ratio at 27.5 per cent and 30 per cent, respectively to spur economic growth.

Prof. Sheriffdeen Tella, Professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State, said the decision did not come as a surprise.

“It is expected that the committee would retain the parameters on the ground that it believed current recession could be solved largely by fiscal measures.

“Given that inflation rate is hovering around 14 per cent, the nominal interest rate cannot be too far from it to create negative real interest rate, which would make the banks not to lend money to the private sector, but invest more in government bonds and other assets,’’ he said.

Tella advised the CBN to assist in tackling recession by providing low-interest rate loans to industrial and agricultural businesses with repayment moratorium.

He said the assistance could be done through appropriate financial institutions like the Bank of Industry (BOI) and the Bank of Agriculture or CBN itself as it had been doing in recent times.

Mr Johnson Chukwu, Founder and Managing Director, of an assets management company, also agreed that the MPC decision was expected.

“It was much expected! I expected that the most appropriate thing the committee could have done, which is what it did, was to keep lending rate at the current level and watch to see the impact of the 100 per cent reduction it announced at the end of its September meeting.

“We know that the MPC had been dealing with a policy dilemma where it had been trying to find a balance to stimulate economic recovery and growth.

Chukwu also said that the committee’s decision would impact on lending rates and credit availability as they would remain the way they were before the policy was announced.

Prof. Ndubisi Nwokoma, Director, Centre for Economic Policy Analysis and Research, University of Lagos, said the retention was sustenance of the growth-inducing policy of the CBN adopted over the Covid-19 pandemic era.

It made credit to be cheap and available, particularly for small businesses, he said.

“The onset of recession makes it virtually mandatory for the CBN to continue along these lines to continue the growth stimulation process,’’ he added,

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