By Chinwendu Obienyi
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has been urged to redesign its policies to promote growth in production.
According to experts, there is a possibility that further tightening will be adopted to anchor inflation expectations, adding that they expect the Committee to increase the Monetary Policy Rate (MPR) by at least 50 basis points.
The MPC is faced with the decision of holding or hiking the MPR further at a time global central banks are marching on with their interest rate hiking cycle despite the increasing risks to growth due to the fact that the Committee will meet today and on Tuesday.
It is also expected that the MPC will assess domestic and global economic environment, specifically the key economic and financial indicators since its last policy meeting.
In their reaction, analysts noted that the Q2 2022 growth print (+3.54 per cent y/y) suggested that the committee could become cautiously comfortable with the growth levels, giving it a much-needed reason to maintain its fight against the stubbornly-high inflationary pressures, more so that a sustained negative real interest rate could dampen domestic investments and undermine the stability of the local currency. “Moreover, the more hawkish rendition from global central banks also supports the Committee towing the same path to reduce external pressures. Thus, we think further tightening is necessary to anchor inflation expectations. Consequently, we expect the Committee to increase the MPR by at least 50bps and adjust the asymmetric corridor back to its pre-COVID level (+200/-500bps) from +100/-700bps around the MPR.
We also expect the Committee to remain concerned about the persisting inflationary pressures even as the primary harvest season is underway amid high input and fertilizer costs.
Thus, we expect the Committee to urge the fiscal authority to sustain its real sector interventions and take decisive steps in tackling the structural challenges limiting food production in the country”, analysts at Cordros Research said.
For his part, a development economist, Dr Emeka Okengwu who spoke during a programme monitored by Daily Sun, noted that it is high time the committee redesign policies by having a multi-dimensional approach to solving the economy’s problem.
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“I think we are between the rock and the hard place now. Remember that the US has raised its own interest rate and they have had two consecutive negative growth meaning that technically they are in a recession. The Euro and Pounds for the first time is doing very badly against the dollar and we are part of this global mix. Instead of praying, we should think more and even if the rates are raised or not, the truth remains that if you do not get us into production and I mean walking the talk which means that we need to re-design our policies and how we run our policies here and scale on what we are doing.
We need to stop having a single approach rather we should have a multi-dimensional approach to solving our country’s problems because no matter how much the FG wants to solve, if the local government who are the major components are not directly involved, then we will be having disruptions”, He explained.
Okengwu further added that, “There is nothing wrong with borrowing but we need to borrow right and this involves the right skill, knowledge, right markets to be able to return the money borrowed. This is where we have a very big gash. We have to close ranks between the fiscal and monetary but in doing so, we need to focus on the most critical components that we need”.