March MPC: Experts foresee interest rate retention due to rising inflation

Financial experts on Sunday express optimism that the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) will retain interest rate due to rising inflation rate.

They stated this in an interview with our reporter in Lagos on expectations from the meeting slated for March 23 and March 24.

Uche Uwaleke, Professor of Finance and Capital Market at the Nasarawa State University, Keffi, said that the committee would retain interest rate having increased Cash Reserve Requirement (CRR) from 22.5 per cent to 27.5 per cent in January.

“I don’t foresee any change in status quo as the CBN only in January increased the CRR from 22.5 per cent to 27.5 per cent.

“Also, the recent adjustment in exchange rate/devaluation of the naira should take care of undue pressure on the external reserves for now.

“So, I expect the MPC to hold the MPR at same 13.5 per cent since it is still higher than inflation rate of 12.2 per cent.

Sheriffdeen Tella, Professor of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun, said the MPC would likely retain the Monetary Policy Rate.

Tella noted that the committee would be burdened by provision of cheap credit for producers and stemming rising inflation.

“I see the committee being burdened by provision of cheap credit for producers and stemming rising inflation which will involve reducing rates to encourage cheap credits or leaving the rates as they are,” he said.

Tella, however, explained that the current inflation trend was caused by shortage of goods and not high level of liquidity.

It was reported that the committee at the first meeting of the year in January reviewed the CRR upwards to 27.5 per cent from 22.5 per cent to tame inflation.

The CRR is used to determine the minimum deposit commercial banks must hold in reserves with the CBN rather than lend out.

It influences funds available at the bank’s disposal to create loans.

With a vote of nine out of 11 members, the committee agreed that the MPR, which impacts interest rate, should remain at 13.5 per cent, liquidity ratio at 30 per cent and asymmetric corridor at +200-500 basis point.