Why CBN retained monetary rates – Uwaleke
*As Apex bank call for more funding in agric sector
Philip Clement
A financial expert Uche Uwaleke has stated the decision of the Monetary Policy Committee of the CBN to retain monetary rates was due to the economic pressure the country is facing.
He said “The outcome of the November MPC meeting, which is the last for the year was expected.
“The MPC reduced the MPR by 100 basis points only recently- during their last meeting in September.
“So, I did not expect any shift in position. Yes, the economy is now in a recession but this was already known to the members of the MPC before the September meeting. The reduction in MPR at that time was meant to aid economic recovery. Also I didn’t expect a further reduction given the spike in inflation rate and a resurgence of pressure in the forex market.
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“On the other side, an increase in MPR to stem inflation was also not expected in view of the adverse consequence on economic recovery,” he said.
According to Uwaleke, given the limitations associated with using the traditional monetary policy tools to stimulate the economy that is currently challenged by Stagflation, the feasible option the CBN has now is “To continue to use heterodox measures such as the LDR and various intervention measures to support growth,”
During it’s last MPC for the year, the Central Bank retained the interest rate at 11.5 per cent and other parameters, adding that the policies have yielded positive results.
CBN Governor, Godwin Emefiele, revealed the decision at the 276th Meeting of the Monetary Policy Committee in Abuja.
The decision by the apex bank was necessited by the second contraction of the Nigerian economy by 3.62 per cent, from the 6.1 per cent fall in the second quarter of the year.
The committee had in the last meeting cut interest rate by 100 basis points to 11.5 per cent, a decrease from the 12.5 per cent previously held.
Emefiele stated that the inflation is supply side driven particularly on agricultural products, electricity and fuel price hikes.
The CBN Governor said the MPC noted improvement in the different sectors of the economy mostly in the manufacturing sector and the financial service sector.
On its outlook for the economy, he said the economy is expected to recover by 2020, as the governor called on financial institutions to increase its credit to the agricultural sector.
