Experts predict retention of monetary rates ahead MPC meeting
Ahead of the last Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) for 2019, financial experts have predicted retention of major economic parameters.
At the close of the last meeting, MPC members voted to hold all parameters of the monetary indices – meaning the retention of anchor lending rate, (Monetary Policy Rate) 13.5 per cent, retaining the asymmetric corridor of +200/-500 around the MPR; Cash Reserve Ratio (CRR) at 22.5 per cent and Liquidity Ratio (LR) at 30 per cent.
Speaking in an exclusive telephone chat with The Daily Times on Sunday, financial experts believed that with the current rate of inflation at 11.61 per cent, the committee cannot afford to loosen any of the rates at the moment.
The Chief Executive Officer of Global Analytics Consulting Limited, Tope Fasua, said the MPC CBN will maintain monetary policy rates, which it has done in the last two years.
“I believe that the MPC will hold rates at 13.5 per cent with the corridor of +2-5. This is because inflation has inched up to 11.61 per cent meaning that if we do not want inflation to run away, we cannot reduce rates for now.
“Also, Nigeria cannot afford to increase benchmark rates as there will be an outcry from manufacturers, which is why government policies must reflect the current economic realities on the ground in the area of unemployment and entrepreneurial development,” Fasua said.
Also, Managing Consultant, BIC Consultancy Services, Dr. Boniface Chizea, said it will only be rational for the Monetary Policy Committee of the Central Bank to maintain the status quo in line with the economic realities on the ground.
“I don’t think they will do anything differently. If they do anything fundamentally different, it will be a surprise.
“Inflation rate has now increased to 11.61 per cent of which all of us know that the shutdown of the borders caused it. As long as the borders remain shut, we will keep having inflation going up.
“When you look at the Monetary Policy Committee, the only instrument they have at their disposal is the interest rate. So by implication, if inflation is skyrocketing, you cannot reduce monetary rates.
“Many people argue that when inflation is high, monetary rates should be reduced to boost productivity, but what about people who save money? Because all these people pay what is known as inflation tax, as such, the interest they get is less than inflation, it means they have lost.
“The current Monetary Policy Committee is not aggressive as they kept the MPR for 2 years at the same percentage and as such, we do not expect much difference.
The only thing the CBN is doing differently now is raising for revenue for the government through the cashless policy and other charges from financial services,” he added.
It would be recalled that the CBN’s MPC at the last meeting noted the unstable oil prices, lamenting over its implications on the accretion of foreign reserves.
The MPC chaired by Mr. Godwin Emefiele had called on the Federal Government to build fiscal buffers.
Emefiele in his words said: “The Committee called on the National Assembly to exercise restraint from increasing the oil price budget benchmark to avoid budgetary overruns at the implementation stage of the budget.
Projections from the oil futures market indicate that oil prices will remain tight around the budget oil price benchmark in the medium term.”
