NAN-HE-1
MPC: Experts commend retention of 14% interest rate
By Chinyere Joel-Nwokeoma
Lagos, Jan. 25, 2017 (NAN) Some financial experts on Wednesday said the Federal Government’s fixed income securities would continue to enjoy higher patronage with the retention of the interest rate at 14 per cent by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN).
They told the News Agency of Nigeria (NAN) in separate interviews in Lagos while reacting to the outcome of the maiden MPC meeting for the year, that the rates retention was expected.
Dr Uche Uwaleke, Head of Banking and Finance Department, Nasarawa State University, Keffi, said that investors’ sentiments would be more in favour of government high-yield securities.
He said that the lackluster performance of the stock market would continue at least in the near term.
“My position has always been that a tight monetary policy is detrimental to an economy in recession. The ‘do nothing’ option adopted by the MPC this time was expected, being its first meeting this year.
“It was the same case this time last year when the MPC chose not to tinker with the rates in January 2016.
“In view of an inflation rate as high as 18.55 per cent in December 2016 up from 18.48 per cent in November when the MPC last met, the justification for further tightening of policy presented itself.
“The decision not to do so is therefore remarkable when the current economic recession is factored in. With this stance, the economy continues to throttle slowly towards recovery.”
Mr Okechukwu Unegbu, former President, Chartered Institute of Bankers of Nigeria (CIBN), said that the outcome of the meeting was in line with analysts’ expectations.
Unegbu said that there must be a coordination between the Ministry of Finance and the CBN in terms of fiscal and monetary policies for the economy to move forward.
According to him, there must be checks and balances in all tiers of the government for the country to make progress.
He stated that government needed to put together a strong economic team to bring the country out of recession.
According to him, the International Monetary Funds (IMF) projections and solutions would not help the country.
“Government needs to bring in brilliant and knowledgeable people that understand the economy to bring us out of recession,” Unegbu stated.
Unegbu, who is also the Managing Director, Maxifund Investment and Securities Ltd., said that recession was not a new thing, adding that the major problem of Nigeria was being used to free money.
He noted that most businesses had closed down due to unfriendly regulatory policies, while state governors had refused to think inwards due to over reliance on federal allocations.
Unegbu noted that the situation had left various state governments unable to pay the salaries of their workers in spite of bailout funds advanced to them by the Federal Government.
According to him, government needs to trim the cost of governance in line with economic realities.
NAN reports that the MPC at its meeting held benchmark interest rates at 14 per cent.
Mr Godwin Emefiele CBN Governor, announced that the committee also decided to keep Cash Reserve Ratio (CRR) and liquidity ratio at 22.5 per cent and 30 per cent, respectively.
He said the 10 members present at the meeting decided unanimously to keep the asymmetric corridor at +200 and +500 basis points. (NAN)
JNC/MZA
Edited by Maharazu Ahmed