A university don, Prof. Sheriffdeen Tella, on Wednesday, said that the slowdown in economic recovery would persist with the retention of the Monetary Policy Rate (MPR) at 14 per cent.
Tella, Professor of Economics, Department of Economics, Olabisi Onabanjo University Ago-Iwoye, Ogun, said this in an interview with the News Agency of Nigeria (NAN) in Lagos, while reacting to the outcome of the Monetary Policy Committee (MPC) meeting.
He said that the Central Bank of Nigeria (CBN) contractionary monetary policy had been responsible for the slowdown in economic recovery.
Tella stated that the pursuance of the policy with the decision of the MPC simply meant that the slow recovery would continue.
He said that the high level of depreciation had made it difficult for companies importing raw materials that could be produced here to look inward.
This, according to him, results in high demand for cassava and rice with concomitant increase in the number of hectares for cultivation.
“But for the fact that there is direct intervention in agriculture from the fiscal side, the efforts to increase output would have been frustrated by the CBN which is frustrating access to credit by industries that want to add value to the raw materials being produced.
So, the slow growth and slow recovery from the recession continues,” Tella said.
He also said that the contraction of the economy by 0.52 per cent in the first quarter could be linked to the same CBN policy which was not in harmony with the fiscal expansionary policy.
“Actually, in a country with serious infrastructural deficits, there is the need for tax incentives for the local producers to reduce cost of production. This is a fiscal measure,” he added.
Tella said that such tax incentive could be in terms of reduction in tax which could even be graduated such that the percentage tax charged reduced with increase in production.
He said that the development would make firms to expand and employ more people who invariably paid income tax that could cover the shortfall arising from initial tax incentives.
More important, however, is the fact that the Central Bank must make credit available to investors at cheap or affordable rate.
The apex bank kept its benchmark interest rate at 14 per cent at the end of the MPC meeting.
The CBN Governor, Mr. Godwin Emefiele, said that the bank’s MPC voted to retain the headline rate.
“In consideration of the challenges weighing down the domestic economy and the uncertainties in the global environment, the committee decided by a unanimous vote of eight members in attendance to retain the MPR at 14 per cent,” Emefiele said.
He said that the bank also kept its cash reserve ratios for commercial banks at 22.5 per cent.
Emefiele added that the bank wanted to end the spread between the black market and official foreign exchange rates.
He said that the recent rise of the naira versus the dollar showed that the apex bank policies were working.
“We would prefer a convergence that will go southward rather than northward, but the fact that we have seen the convergence (going) southward gives us a lot of hope that things are working in the right,” Emefiele said. (NAN)