By Merit Ibe
The Lagos Chamber of Commerce and Industry (LCCI) has opined that the decision of the Monetary Policy Committee of the Central Bank of Nigeria (CBN) to retain its policy parameters would enhance credit flows, stimulate output growth and moderate inflationary pressures.
The LCCI assertion came amid calls on the committee to ensure increased attention to its foreign exchange policies which also have profound implications for economic performance and investor confidence, noting that they are as strategic as liquidity management functions.
The MPC of the apex bank had on Tuesday opted to retain policy parameters during its March meeting with Monetary Policy Rate (MPR) at 11.5 per cent; Cash Reserve Ratio (CRR) at 27.5 percent; and Liquidity Ratio at 30 percent.
Director General of LCCI, Dr Muda Yusuf, in his reaction on the decision of the committee said the chamber appreciates the dilemma which the current stagflation condition presents to the monetary authorities, noting the imperative of striking a balance between stimulating output growth and curbing rising inflationary pressures.
“Considering recent macro developments in the economy, holding policy stance unchanged seems to be most appropriate decision at this moment.
“The CBN governor stated at the briefing that the bank’s current policy focus anchors on boosting output growth given the fact that the domestic economy narrowly exited recession in the fourth quarter of 2020.” He said.
He believes sustained intervention efforts of the bank would further enhance credit flows to the real economy, stimulate output growth and ultimately moderate inflationary pressures.
The chamber noted that with unemployment rate at a record high of 33.3 percent coupled with weak employment levels in manufacturing and services sector, tightening monetary policy stance would stifle access to credit, and undermine the pro-growth agenda of the CBN.
“Headline inflation rose by 17.33 percent in February 2021, the highest price level since March 2017.
“As we have stated in our previous position papers, consumer prices are currently driven by cost-push factors including heightened insecurity resulting in persistent decline in agricultural output; foreign exchange illiquidity, exchange rate depreciation, higher energy prices and upward adjustment of electricity tariffs, which are beyond the control of monetary authority.”
Dr Yusuf endorsed the position of the MPC on the need for fiscal authorities to expedite actions in addressing these challenges and other investment climate issues constraining the supply side of the economy and fuelling inflationary pressures.
“Foreign exchange framework is key to the price stability mandate of the CBN.”
He pointed out the divergent positions of both the fiscal and monetary authorities on the country’s foreign exchange policy framework, stressing it was important for the fiscal authorities, CBN and Economic Advisory Council to be on the same page as far as the country’s foreign exchange policy framework was concerned.
“This lack of coherence among policymakers sends a negative signal to the investment community, aggravates uncertainty and undermine the confidence of investors.”