.Says it’ll kill economy
Centre for the Promotion of Private Enterprise (CPPE) promoted and run by Muda Yusuf has lamented that the recent hike in interest rate by the Central Bank of Nigeria (CBN) will further worsen the dire economic situation Nigeria is facing.
Such increase, the Centre noted, would be detrimental to investment and growth of the economy.
In a statement, Muda Yusuf, who is the chief executive officer of CPPE, said the economy needs oxygen and stimulus, not policy measures that would worsen an already suffocating situation.
The monetary policy committee (MPC) of the CBN, had on Tuesday raised the monetary policy rate (MPR) from 26.75 percent to 27.25 percent.
The MPR benchmarks other interest rates. Thus, raising MPR means a rise in other interest rates.
CBN’s governor, Olayemi Cardoso had on Tuesday after the Monetary Policy Committee meeting announced the measures.
The apex bank, however, retained the asymmetric corridor at +500 and -100 basis points but increased the cash reserve ratio (CRR) from 45 percent to 50 percent. It also retained the liquidity rate at 30 percent.
While commenting on the MPC decisions, Yusuf, a former Director General of the Manufacturers Association of Nigeria MAN, said these monetary conditions are very difficult to bear for most businesses, given the prevailing macroeconomic and structural conditions.
He said it was quite troubling that at a time when manufacturers, entrepreneurs, and other investors in the economy are craving for a breath of fresh air, the CBN chose to tighten the noose on them by resorting to a further tightening of monetary policy.
The latest policy choice of the apex bank, he said, was at variance with the mood of most economic players and the desire to promote economic recovery and growth.
He explained that what manufacturers and other investors need at this time is some oxygen and stimulus, not policy measures that would worsen an already suffocating situation.
Yusuf said that most of the extra money in the system comes from the public sector, so the solution should focus on that sector.
“The private sector should not be made to pay the price of liquidity growth which they were not responsible for,” he noted.
He was of the view that issues of excess liquidity should be addressed within a causative context as injection of liquidity into the system is largely public sector-driven. He advised that the focus of resolving it should be within that context.
He said, “Stifling the financial conditions to address liquidity issues is detrimental to investment and growth of the economy. The implication of the latest MPC decision for investors is quite concerning as cost of funds would be further exacerbated, possibly well above 35% or more. It is made worse by the increase in CRR to 50% and retention of an asymmetric corridor of +500 and -100.”
He warned that the increase in CRR to 50 percent would have negative consequences for the banking system and the economy.
“We believe that the policy decisions of the CBN are most inappropriate for the prevailing economic conditions and the challenges faced by entrepreneurs in the country,” Yusuf said, adding that the operating and production costs of businesses would be further exacerbated by the latest monetary policy tightening.
He said the increase in CRR to 50 percent would constrain financial intermediation with negative consequences for the banking system and the economy.