DG, LCCI, Mr. Muda Yusuf
The Lagos Chamber of Commerce and Industry (LCCI) Tuesday expressed concern over Monday’s decision by the Central Bank of Nigeria’s (CBN’s) Monetary Policy Committee (MPC) to maintain its monetary policy stance.
Director-General, LCCI, Mr. Muda Yusuf, in a statement argued that the decision to leave the Monetary Policy Rate (MPR) at 12 per cent would further impede competitiveness of firms.
The MPC for the eighth time in a row, resolved to leave the MPR, which is the benchmark interest rate unchanged at 12 per cent with a corridor of +/-200 basis points. It also left banks’ Cash Reserve Ratio (CRR) unchanged at 12 per cent and retained the Liquidity Ratio at 30 per cent.
CBN Governor, Mallam Sanusi Lamido Sanusi, had revealed that eight members of the committee voted to retain the MPR at 12 per cent while two members favoured a reduction of the MPR by 25 basis points.
But, Yusuf insisted that the resolution by the MPC would bring about unfavorable economic conditions such as depressed economic activities, which according to him, had manifested in low sales, weak consumer demand, huge inventories by manufacturers, liquidity squeeze and tight cash flow conditions in the economy.
The LCCI boss listed other consequences of the MPC’s decision to include high risk of loan defaults, poor access to credit, weak financial inclusion, limited capacity of firms to retain or create new jobs, crowding out of domestic investors by foreign investors as well as influx of hot money into the economy.
“What is paramount at this time is the stimulation of the economy and that is the norm globally. Affordable and longtime finance may not be a sufficient condition for economic growth, but it is a necessary condition. Cash is the life blood of business! We acknowledge the structural and institutional bottlenecks in the economy and their impact on economic growth.
“Consequently, all policy tools – monetary and fiscal - should be deployed to stimulate the economy. Low inflation and robust reserves are good, but they are not ends in themselves; they are means to an end. The ultimate objective is to strengthen the economy and improve the welfare of citizens. The fixation of the CBN for curbing inflation and building reserves is, in our view, disproportionate,” he maintained.
Therefore, Yusuf urge the policy makers to soften the monetary policy stance, reduce the yield on government securities to single digit, give more room for banks to create credit, increase the credit risk tolerance of the banking system and fix the structural and institutional bottlenecks in the economy.