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The Monetary Policy Committee (MPC) of Central Bank of Nigeria (CBN) will today, Monday begin its second meeting on review of monetary policy activities in Abuja. The meeting is expected to end Tuesday with a communiqué which will roll out new rates including lending rate and others.
Some economists who spoke to Business Hilights correspondent said considering the recent inflation figure which shows recovery, there is need for the apex bank to consider lowering status quo on its monetary policy rates.
He further canvassed a downwards review of the interest rate, in order to boost the activities of the private investors who had been offline since 2016.
Leading the pack of calls for drop in rates include the Director General of Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA), Mr Emeka Okereke who argued that “We need private investment, whether foreign or local – we hope that as the naira gains in value, the interest rate also comes down so that businesses could thrive.
“The current interest rate, which is 25/30 percent, discourages private investment. It is an area the CBN should look at; the Federal Government should intervene by reviewing the interest rate,” Okereke added.
However, the CBN governor recently gave an insight into what may be expected when he said it is not always good to tamper with figures of rates when an economy is facing squeeze to avoid destabilizing the economy further.
In the same vein, another set of economist supported CBN’s stand, saying the CBN’s lending rate is expected to remain at 14 per cent while Cash Reserve Ratio (CRR) at 22.50 per cent and liquidity ratio at 30 per cent. He noted that the drop in inflation rate for the first time in 15 months might further delay changes in CBN’s rates next week.
Penultimate Tuesday, the National Bureau of statistics (NBS) had disclosed that the nation’s inflation rate dropped to 17.78 per cent in February, 0.94 per cent below 18.72 per cent in January this year on the backdrop of slower rise in food and non-food prices.
Analysts say it was a result of the CBN’s effective policies in the foreign exchange market which have impacted positively on foreign reserves.
MPC is expected to rely on the decline in Inflation rate which is happening for the first time in 15 months from 18.72 per cent to 17.78 per cent in February to think deep on ways of internalizing the gains of the drop in inflationary trend.
However, a development finance expert, Dr. Ken Igboanugo told our correspondent Sunday evening that “the MPC under the purview of the CBN still need to study and observe further the scenario under which the inflationary trend dropped before thinking of a review of rates to avoid being caught off guard.
According to him, though the CBN’s foreign exchange interventions has increased liquidity given the further appreciation of the Naira, it is not yet very safe to tamper with the rates to avoid a disruption capable of plunging the economy into a state of policy confusion.
The CBN is expected to announce either new rates or maintenance of existing ones at the end of its MPC meeting before the end of tomorrow.