MPC: Rates retention consistent with global trends – Experts

Financial experts have commended the retention of the Monetary Policy Rate (MPR) and other parameters by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN).

They said the outcome of the 278th MPC was in line with predictions and consistent with global trends among central banks.

They said this in interviews with our reporter on Tuesday in Lagos, while reacting to the outcome of the 278th MPC meeting.

The Association of Capital Market Academics of Nigeria (ACMAN) president, Prof. Uche Uwaleke, said the retention of the rates by the MPC was in line with market expectations.

Uwaleke said the decision to retain rates was to strike a balance in a stagflation era.

“As a matter of fact, most central banks are maintaining accommodative monetary policies due to the lingering negative impact of the COVID-19 pandemic,” Uwaleke said.

He explained that a reduction in the Monetary Policy Rate was not an option due to rising inflation and exchange rates pressure.

According to him, increasing the MPR can roll back modest progress made in the area of credit to the real sector and economic recovery generally.

“So, the best decision under the circumstance was to hold rates and rely more on development finance functions to stimulate economic growth,” Uwaleke said.

Uwaleke had predicted that the MPC would hold the rates in March in spite of rising inflation due to weak economic recovery, which stood at 0.11 per cent in the fourth quarter.

Also speaking, the Chief Operating Officer, InvestData Ltd., Mr Ambrose Omordion, told NAN that the decision of the MPC was in line with general mood of the market.

Omordion observed that it was too early to adjust the rates due to fragile recovery from recession.

“The outcome of the MPC meeting was in line with our expectations even when galloping inflation was a threat that could lead to rate hike but due to fragile growth or recovery from recession, it will be too early to start adjusting rates.

“The retaining of monetary policy instrument is to allow the economy to breath out and watch the recovery till the next MPC meeting in May with the expectation that government will address the insecurity challenge,” he said.

Omordion added that the nation’s hyperinflation was due to high cost of production, lack of structural reforms, unstable exchange rates and high unemployment rate at 33.3 per cent.

“With rising insecurity, high pump price of fuel and other challenges, government should review or rethink its subsidy removal because the way things are going, food inflation will hit 30 per cent and this will push March and April inflation higher,” he said.

It was reported that the MPC at the end of its 278th meeting in Abuja on Tuesday, resolved to retain the MPR, or the controlling lending rate, at 13.5 per cent, with the asymmetric corridor at +200/-500 basis points around the MPR.

The CBN governor, Mr Godwin Emefiele, who read the communique at the end of the meeting, said the MPC also resolved through a unanimous vote to retain the Liquidity Ratio at 30 per cent.

The Cash Reserve Requirement was left unchanged at 27.5 per cent.

Emefiele said the decision of the committee to retain the controlling rates was informed by the need to observe the impact of steps already taken under a massive intervention plan to save the economy from COVID-19 pressures.