BUSINESS Experts react as MPC retains lending rate at 14% Osinbajo tasks African tax experts on transparency
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has retained the benchmark lending rate and other monetary policy rates against a backdrop of macroeconomic stability.
The CBN Governor, Gowin Emefiele, disclosed this in Abuja yesterday while addressing journalists on the outcome of the MPC meeting.
Mr. Emefiele said that seven members of the MPC were present at the meeting and 6 members voted for the retention of all rates while one member voted for the easing of the lending rate.
He said Cash Reserve Ratio was also retained at 22.5 per cent and Liquidity Ratio at 30 per cent.
The News Agency of Nigeria reports that since July 2016, there has been no major monetary policy change.
“On the argument to hold the rates, the committee believes that the effect of fiscal policy action towards stimulating the economy has begun to manifest as evidenced in the exit of the economy from the 15-month recession.
“Although it seems fragile, the fragility of the growth makes it imperative to allow more time to make appropriate complementary policy decision to strengthen the recovery.
“Secondly, the committee was of the view that economic activities would become clearer between now and the first quarter of 2018 when growth is expected to have sufficiently strengthened.
“The most compelling argument for a hold was to achieve more clarity in the evolution of key macro economy indicators, including budget implementation, economic recovery, exchange rate, inflation and employment generation,” he said.
Reacting to the MPC’s decision, Johnson Chukwu, Managing Director of Cowry Assets Management Limited, said the retention of policy rates was in line with his expectation.
Chukwu said: “We reiterate our view that the MPC is expected to prioritize its policy stance above output growth consideration until conditions dictate otherwise. Moreover, the MPC already hinted that it expects to reconsider its current stance if output growth is sustained up until the first few quarters in 2018.
The head of institutional sales at Vetiva Capital Management Limited, Pabina Yinkari said the predictability of this particular monetary policy outcome, goes a long way to show how Nigeria’s economy has improved in recent times.
Recalling the past, when MPC meetings are characterized by a lot of speculations around foreign exchange (forex), inflation and interest rates because the picture was not clear then, Yinkari said today, “we could see that Nigeria has an economy that is looking more clearer. “
Agreeing with Yinkari, Ogho Okiti, Economist and Chief Executive Officer, Time Economics in a TV program monitored in Lagos stated that the un-eventful nature of the meeting is how Economic policy meeting should be. To him, “Monetary policy meetings should be boring. If it is very active and packed with so much tension, it means that there are problems in the economy. So, what we have seen is evidence that while we are not where we should be, we have recorded some signs of recovery. Nigerians are only hoping that this recovery continues, even at a faster rate.”
Tajudeen Ibrahim of Chapel Hill Dunham is of the view that the MPC might have been careful not to reduce rates because it can worsen price level which is still high. According to him, the floods that “we are seeing in the country speaks to a negative outlook in terms of food inflation.” When you see flood he stressed, you see reduced agricultural activities and that speaks to probably higher prices of foods in the coming months. FLIGHT
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