Sir: It’s already in public domain that Monetary Policy Rate has just been increased to 27.25%. Rising from its meeting in Abuja, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) decided to move up the August position of 26.75% by 50 basis points.
Even though, MPC resolved to maintain the Liquidity Ratio (LR) at 30%, they also effected increase in another monetary policy tool – Cash Reserve Ratio (CRR), both for the commercial and merchant banks which also went up by 50% basis points, from their previous position in August.
This writer feels strongly that the apex bank is too much in a hurry to effect the increase in MPR by 50% basis points, having just hiked the rate in August to 26.75%. Even though, CBN have their reasons for the hike, especially the recent sudden increase in the price petroleum products with particular reference to petrol (PMS), nonetheless, this increase is surely against the expectation of the investing and banking community, and may be counter-productive to economic activities.
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MPR, a benchmark policy interest that prescribes the basis for other macro-economic interest rates in Nigeria should be treated at all time with sensitivity that it deserves.
For emphasis, it’s the rate that Central Bank of Nigeria (CBN) borrows and lends to commercial and merchant banks, as well as the rates at which those banks prescribe their lending and deposit activities to their clients.
In the present circumstance the nation found itself, what CBN ought to have considered is to attempt to maintain the August position with a view to exhausting effect of 26.75% on the economy, more-so, when the global MPR too is fast easing.
Of course, there is no doubt that the MPR increase would further tighten the economy, as it would make it difficult for the real sector and other users of fund to access fund for the manufacturing and other economic activities.