Bimbola Oyesola
The Lagos Chamber of Commerce and Industry (LCCI) yesterday warned against the upward review of the Cash Reserve Requirement (CRR) from 22.5 to 27.5 percent.
According to the Director- General of LCCI, Mr. Muda Yusuf, the upward review will lead to a reversal of the current downward trend in interest rates.
Reacting to the outcome of the recent Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting, Yusuf noted that the current downward trend in interest rate is beginning to impact positively on the economy, especially the real sector.
He stated that the adverse effect of the CRR increase on deposit mobilisation could impact negatively on the financial intermediation role of Deposit Money Banks.
He said: “The Chamber welcomes and aligns itself with the concerns expressed by the MPC on the rising debt profile and the associated sustainability concerns.
“Additionally, the need to rationalise fiscal expenditure and reduce cost of governance and the need for government to address structural and security issues to strengthen domestic productivity are noted.
“The use of Debt-to-GDP ratio as a measure of debt sustainability, vulnerability of the economy to external shocks and the imperatives of building buffers, risk of excess liquidity from maturing OMO bills are also of concern.”
He however said that a high interest trajectory (which the tightening policy portends) will impact negatively on investment growth especially in the real economy. “The prospects for increased job creation may be further dimmed,” he said.
The LCCI boss added that the recent rebound in the stock market would suffer a reversal as interest rates increase and money market instruments become more attractive to investors.
Acording to him the Organised Private Sector (OPS) believes that what the economy needs at this time are policies aimed at stimulating investment to boost output, create jobs and ultimately moderate inflation.
“Monetary policy tightening will negate the realisation of these objectives,” he said.
The Director-General said that it is pertinent to prioritise domestic investment growth and foreign direct investment (FDIs) over foreign portfolio investment (FPIs).