• Foreign reserves grow to $28.9 billion • Economic change remains elusive, say experts
The Central Bank of Nigeria (CBN) yesterday retained the Monetary Policy Rate (MPR) at 14 per cent.It is the rate at which the CBN lends money to deposit money banks in the country.
According to the apex bank, the need to watch and re-assess the challenges that confronted the economy in 2016 and the opportunities for recovery in 2017 informed its decision against calls by some stakeholders for a cut in the rates to engender credit as a means of spurring national growth.
Accordingly, it maintained all the policy rates at their subsisting levels: MPR at 14 per cent; Cash Reserve Requirement (CRR) at 22.5 per cent; and Liquidity Ratio at 30.00 per cent. The bank retained the asymmetric corridor at +200 and -500 basis points around the MPR.
The implication, according to a director at Union Capital Market Limited, Egie Akpata, is that foreign exchange development would remain challenged and supply would be more from the regulator as usual.
Executive Director, Corporate Finance at BGL Capital Limited, Femi Ademola, said with all the rates kept on hold, the retention would sustain the high yield in the fixed income market, which the government mostly patronises through its risk-free securities, while funds for productive activities may even go higher.
The last time there was a change in the policy rate was around July last year when the MPR was moved from 13 per cent to 14 per cent as part of tightening measures to check inflation or excess liquidity in the country.
Addressing newsmen at the end of the Monitoring Policy Committee (MPC) meeting yesterday where the decisions were taken, CBN Governor, Mr. Godwin Emefiele, who also announced that the country’s foreign reserves had grown to a new height of $28.9 billion, gave more reasons to support the committee’s decision.
“Conscious of the prevailing market sentiments in favour of a rate cut, the committee reasoned that most of its decisions in 2016 were informed by the need to address the delicate balance between price stability and growth. Noting that the pressures on consumer prices were yet to abate and even as the economy continued to be in recession despite the intervention support by the CBN, the committee stressed that it was not oblivious of the full ramifications of the economic challenges facing the country,“ he said.
The MPC, Emefiele explained, was concerned that the current situation was not amenable to simplistic analyses and quick fixes such as have found expression and increased attention at different fora and the media. He pointed out that the domestic economic challenges which include chronically import-dependent consumption culture, lack of competitiveness of many sectors of the economy and yawning infrastructural gap, have combined with an unfavorable external environment to complicate the macroeconomic policy environment.
But a development economist, Mr. Odilim Enwegbera flayed the inability of the CBN to cut down rates, saying the apex bank was prolonging Nigeria’s quick recovery from recession
Enwegbara said this is the time for CBN to have loosen grip on the measures, pointing out that at a time of recession, all the economic throttles should be accelerated in a way that forces the entire economy to pick up speed.
“It is by this push that all the sectors of the economy could come on board. But there is no better accelerator of the economic engine than the monetary policy of the country’s central bank. That’s why whenever modern economies are hit by recession, the two things their respective central banks do are to quickly reduce interest rates and inject more liquidity into the economy.”
Meanwhile, some civil society groups and experts have said that the expected change in the economy is yet to be realised.The verdict, which took into consideration the national budgeting processes and its implementations, according to them, has maintained the same tradition that has impinged on its performance.
Consequently, while the economy will continue to battle the recession, hopes have dimmed further that the 2017 budget may not make the difference in ensuring growth and improved well-being of the citizenry.
At the 2017 civil society summit on federal budget in Abuja, yesterday, the Lead Director of the Centre for Social Justice, Eze Onyekpere, pointed out that budgets over the years have failed the test of physical proofs capable of lifting the economy.
Warning of its failures in connection with exchange rate benchmark, he noted that the quest for elusive foreign investments has shifted all attention away from measures needed to sustain domestic investments and businesses that are already providing jobs.