Experts express concerns over hike in Nigeria’s monetary policy rate
The recent hike in Nigeria’s Monetary Policy Rate (MPR) by the country’s Central Bank of Nigeria (CBN) has raised concerns among some of the country’s financial practitioners, who believe that the action could worsen inflation.
The MPC reportedly increased the lending rate by 50 basis points from 17.5 per cent to 18 per cent during a 290th meeting held on Monday and Tuesday. It marked the sixth time that the committee had hiked the MPR, which serves as the baseline lending rate in Nigeria’s economy.
Financial experts expressed their worry about the inflation figures and the country’s naira shortage, stating that hiking rates would not help the Nigerian economy.
Financial analyst Muktar Muhammed advised that the apex bank should consider the cost of borrowing in its monetary policy decisions. Additionally, the country needs a more holistic approach as it grapples with “an inflation that is driven by three major factors – micro economy, demand and supply, and production,” he said.
Okechukwu Iwegbu, a financial expert and former president of the Chartered Institute of Bankers of Nigeria (CIBN), said that the rate hike could result in negative effects on the economy. Inflation rates would not abate, and there are too many taxes that are not harmonised, which means that many people are excluded from the tax net. This will have a greater impact on Nigeria’s economy, according to Iwegbu.
Professor Uche Uwaleke, a professor of Capital Market at Nasarawa State University, Keffi, said the hike demonstrated the committee’s primary mandate of controlling price stability as it had been concerned with rising inflation and forex market pressure. However, due to the significant drop in currency circulation as a result of the cash scarcity caused by currency redesign policy, Uwaleke expected MPC to maintain a hold position as it concludes the election season to stimulate economic activities and create job opportunities.
Overall, the recent MPR increase has raised concerns among the Nigerian financial sector experts for varying reasons. However, the CBN has come under criticism for the rate increase, which is considered by some to be harmful to the economy.