Dike Onwuamaeze
An Economist and Founding Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, has stated that the new Monetary Policy Rate (MPR) of the Central Bank of Nigeria (CBN), which was announced on Tuesday, July 18, would penalise manufacturers and impact adversely on the equities markets.
Yusuf described the decision of the Monetary Policy Committee (MPC) meeting of the CBN to increase the MPR by 100 basis points from 13 per cent to 14 per cent, as “unexpected, but not desirable,” because it failed to reckon with Nigeria’s domestic peculiarities even though it was in line with the policy tightening trend by central banks across globe.
He told THISDAY yesterday that “the new MPR hike means that the cost of credit to the few beneficiaries of the bank credits and manufacturers that cannot access the CBN windows will increase, which will impact their operating costs, prices of their products and profit margins. The equities market may be adversely impacted by the hike.”
He also argued that the new MPR would hardly achieve the purpose of taming domestic inflation since the “key drivers of Nigeria inflation are supply side variables, not demand driven. The previous hike in policy rate of 150 basis point in May did not have any significant impact on the inflation numbers. If anything, the general price level became even more elevated.
“We recognise that the primary mandate of the CBN is price stability, but numerous headwinds had posed significant risks to this critical objective. Some of these include the surge in commodity prices and impact on energy cost, disruptive effects of insecurity on agricultural output, and global supply chain disruptions. The hike in MPR would not change these variables.”
He posited that the transmission effects of monetary policy on the economy are still very weak “in the Nigerian context where price levels are not interest sensitive and supply side issues are much more profound drivers of inflation. “
