Apart from a heated debate expected on whether to lower or still retain rates, the recent comment by a member of the Monetary Policy Committee (MPC), Dr. Doyin Salami, that the Central Bank of Nigeria (CBN) is acting like a “piggy bank” with its funding of the government will feature prominently during Monday and Tuesday meeting of the MPC.
Salami has argued that he was struggling to understand the CBN’s economic rationale for such action as Monetary data showed a “sharp rise” in the CBN’s financing of the government deficit this year, Salami said after the MPC’s July 24th to 25th meeting.
According to him, the CBN’s claims on the government had risen “20-fold” to N814bn from the end of 2016, while its purchases of government treasury bills increased by 30 per cent to N454bn.
“It is clear that the CBN has provided piggy-bank services to the federal government,” Salami said, alleging that “We thus find ourselves at a point where government borrowing from the CBN is neutralised by raising the CRR of banks, thereby limiting private-sector access to credit”.
Still on countdown to MPC meeting, FSDH Research has argued that after recession, there is need for policy change, saying “A hold in rates at this meeting (Sept 25 and 26), will be appropriate in order to sustain the current growth rate in the economy”.
However, the MPC may adjust the asymmetric corridor around the MPR to signify easing, the research giant averred.