MPR and cost of do­ing busi­ness

Business a.m. - - FRONT PAGE - Sto­ries by Moses Obajemu

TRUE TO POP­U­LAR EX­PEC­TA­TION, the Mon­e­tary Pol­icy Com­mit­tee (MPC) met last week and elected to re­tain the mon­e­tary pol­icy rate (MPR) and other rates un­changed. The MPR is cur­rently 13.5 per­cent and rep­re­sents the rate at which the CBN...

TRUE TO POP­U­LAR EX PECTATION, the Mon­e­tary Pol­icy Com­mit­tee (MPC) met last week and elected to re­tain the mon­e­tary pol­icy rate (MPR) and other rates un­changed. The MPR is cur­rently 13.5 per­cent and rep­re­sents the rate at which the CBN lends to banks.

By im­pli­ca­tion, in­ter­est rate can­not be lower than the MPR be­cause the lenders too will add their mar­gin and charges to the fund users. At the end of the day, the in­ter­est rate may be close to 20 per­cent.

Feel­ers that the MPC would re­tain the MPR and other rates emerged some­times in Au­gust in Lon­don when the CBN gov­er­nor, God­win Eme­fiele, told Reuters that rates would re­main un­changed un­til head­line in­fla­tion fell to sin­gle digit fig­ure, specif­i­cally 9 per­cent. Since then, the con­sumer price in­dex (CPI) used in mea­sur­ing in­fla­tion had gone up to 11.61 per­cent at the end of Oc­to­ber from 11.24 per­cent in Septem­ber

An­a­lysts have pre­dicted that mem­bers of the Mon­e­tary Pol­icy Com­mit­tee (MPC), wouldl leave the bench­mark MPR and other mon­e­tary pol­icy tools un­changed to spur eco­nomic growth in the fourth quar­ter of the year. This is de­spite con­cerns of in­fla­tion­ary pres­sure and de­clin­ing ex­ter­nal re­serves.

.The coun­try’s gross do­mes­tic prod­uct (GDP) growth rate in­creased to 2.28 per cent (year-onyear) in real terms in the third quar­ter of the year (Q3 2019), com­pared to 2.12 per cent in the pre­ced­ing quar­ter, rep­re­sent­ing an in­crease of 0.17 per cent.

Ac­cord­ing to the GDP Q3 2019 re­port re­leased re­cently by the Na­tional Bureau of Sta­tis­tics (NBS), the growth rate in Q3 rep­re­sented the sec­ond high­est quar­terly rate recorded since 2016.

Similarly, there has been sta­bil­ity in the ex­change rate as the naira has con­tin­ued to trade around the band of N360 to a dol­lar.

In con­trast, lat­est fig­ures from the Cen­tral Bank of Nige­ria (CBN) showed that the coun­try’s ex­ter­nal re­serves have fallen be­low the $40 bil­lion mark, as it was at $39.954 bil­lion as at last Thurs­day. The lat­est value of

the re­serves showed a yearto-date de­pre­ci­a­tion by 7.25 per cent or N3.121 bil­lion, com­pared with the $43.076 bil­lion it was as at Jan­uary 2, 2019.

While bor­row­ing at 20 per­cent may be a dilemma for man­u­fac­tur­ers and cer­tainly not busi­ness friendly,

CBN has avoided rate cut like many coun­tries have done in or­der to ease pres­sure on the naira which may be ex­posed to fur­ther cur­rency cri­sis by rate cut.

Like an­a­lysts at Afrin­vest Limited said re­cently, CBN was more in­ter­ested in keep­ing the for­eign in­vestors happy rather than en­gi­neer­ing eco­nomic growth by low­er­ing the cost of do­ing busi­ness in the coun­try. A rate cut may make in­vest­ment in the coun­try less at­trac­tive to the for­eign port­fo­lio in­vestors who, it di­vest from the coun­try, may lead to cap­i­tal flight and more woes for the naira.

If Nige­ria is to take charge of her destiny and launch her­self on the path of sus­tained growth, a mix of fis­cal and mon­e­tary poli­cies that is pro­gres­sive and de­vel­op­ment ori­ented is nec­es­sary Fis­cal pol­icy must ad­dress the a work­ing econ­omy full of in­cen­tives to the real sec­tor while mon­e­tary pol­icy must cre­ate the nec­es­sary macro eco­nomic sta­bil­ity that aids growth and de­vel­op­ment.

As long as we pro­tect the in­ter­ests of the for­eign port­fo­lio in­vestors more than the in­ter­est of Nige­ri­ans, our dream and quest for gen­uine de­vel­op­ment will con­tinue to elude us as a na­tion. The task of find­ing a work­ing for­mula for the econ­omy has been left to the CBN alone by this govern­ment and this is un­help­ful to the cause of the na­tion.

L-R: John Evring­ton, Mid­dle East and Africe Ed­i­tor for The Banker; Omobal­anle Vic­tor- Laniyan, Head, Sus­tain­abil­ity, Ac­ces Bank PLC; Julie Soyinka-Sonuga, Deputy Head, Com­mer­cial Bank­ing, Ac­cess Bank UK; Michael Buerk, English Jour­nal­ist and Host of The 2019 Bank of the Year Award Cer­e­mony, where Ac­cess Bank emerged as ‘Bank of the Year Nige­ria’ in Lon­don at the week­end

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