* Stakeholders canvass good governance structure for capital market
By Ndubuisi Francis in Abuja
The Director, Monetary Policy, Central Bank of Nigeria (CBN), Mr. Moses Tule, has stated that a reduction in the key interest rate — Monetary Policy Rate (MPR) — at this time would throw up a cocktail of fiscal challenges in the economy and create more inflationary pressure.
Tule, who was fielding questions from journalists in Abuja, Thursday on the sidelines of the maiden colloquium of Prof. Uche Uwaleke, the nationâ€™s first professor of capital market, argued that reducing MPR at this time, which has since July 2016 remained at 14 per cent would trigger adverse consequences, including the demand for increased wages.
â€œWhen you reduce MPR, of course, the way the fundamentals are today, you are going to have the impact of that in other ways; which means the demand is going to be higher on the government to increase wages because inflation will erode the living wage. There will be demand on the government, and every other person in the private sector will demand for wage increase.
â€œThatâ€™s the choice. We have to choose between having to improve infrastructure and interest rate will come down overtime and the whole economy will benefit or reduce interest rate now and then worsen inflation,â€ Tule argued.
He debunked insinuations that there was no convergence between monetary and fiscal policies, noting that the fiscal and monetary authorities had come up with measures that helped to put the economy on a growth trajectory.
Tule cited CBNâ€™s ability to put in place foreign exchange measures, which culminated in the steady accretion into the foreign reserves such that the reserves now stand at about $48 billion.
He argued that had the CBN not built up the reserves, the necessary buffers provided in the past few weeks to temper the pressure occasioned by the normalisation of interest rates in the United States of America would not have been there.
The CBN chief also commended fiscal measures put in place by the government, including the decision to look towards offshore borrowing in order not to crowd out the private sector.
Earlier in a panel discussion on â€œFiscal and Monetary Policies for Deepening the Capital Market in Nigeria,â€ Tule had pointed out that stabilising the macroeconomy was desirable to attract investment in the capital market, adding that the CBN had been able to build external reserves.
He called on the federal government to come up with fiscal measures to deepen the capital market.
In his remarks, the chairman of the colloquium and a former Director General of the Securities and Exchange Commission (SEC), Dr. Suleiman Ndanusa, and other panel discussants argued that the overall growth of the country depends on the financial market.
They called for a good governance structure to inspire confidence in both local and international investors.
In his speech, the celebrant, Prof. Uwaleke, called for the diversification of the capital market to ensure that various sectors of the economy are players in the market.
He lamented that when compared with South Africa, the market capitlisation of the Nigerian Stock Exchange (NSE) was nothing to write home about vis-Ã -vis South Africaâ€™s capital market.