Kingsley Ndubueze Ayozie argues for the adoption of the expansionary monetary policy model

Late last month the Nigerian populace greeted with missed feelings the apex bank’s (

ie Central Bank of Nigeria) announcement of an upward movement in the nation’s

monetary policy rate ( MPR) from 24.75% to 26.25% during her 295th Monetary Policy

Committee (MPC) meeting that took place 20- 21 May 2024.

This high interest rate if not urgently looked into by the apex bank once again may

result to serious pressure on our local currency here in Nigeria (ie naira ).This pressure

may further jack up the prices of basic household items like foodstuffs ( garri, rice ,

beans, yam, etc ) which the masses can not do without.

It is regrettable that the food inflation rate have soared, making the

prices of food items not to be within the reach of the common man. Who amongst us

in our widest imagination even envisaged that a paint of garri will be dangling between

N4,000  and N 4,500 ; a bag of rice moving as high as N 80,000; while a bag

of beans soaring high to N 95,000 to N 110,000 . Ironically a sizeable tuber of yam

that cost about N 2,000 before has risen to N 6,000. The issue of

tomoato and vegetables is something else.

On the international level, this increment in MPR may further weaken the purchasing

power of the Naira and this will lead to investors’ loss of confidence in doing business with us here in the country .

The increment in MPR from 24.75% to 26.25% may further lead to high level scarcity

of credit ( loan) facility as the common man on the street who does his daily petty

trading activity may not be able to access with ease credit (loan) facility from our

various financial institutions in order to assist him to do his daily yam or tomato

business on our various streets.

No doubt, if there is no further credit (loan) available for the common man on the street

to do his regular business, invariably that may result to multiple job losses

with a resultant rise in unemployment level, and increase in social vices like armed

robbery, 419 and the likes.

In simple lay man terms, any nation whose interest rate is high may witness a

dwindling Gross Domestic Product ( GDP) which may further result to a decline in the

consumers’ confidence level, thus leading to pauses or breakdowns in our economic

activities with a corresponding rise in the unemployment level as those who are of age

and willing to work or do something meaningful may not see work or have the

financial capability to do so .

Where these challenges abound, obviously there will be need for such an economy to be

revatised or brought back to life quickly in order to avert further crisis within the

country that may smell doom in the long run.

Several measures have been suggested as possible options in overcoming such

economic challenges and this will include but not limited to having a strong credit facility; cutting down on unnecessary spending by consumers’, having an emergency funding

portfolio put in place by the government and more importantly, loosing up on the

monetary policy issue otherwise referred to as expansionary monetary policy (ie EMP

model ) by the CBN.

Expansionary Monetary Policy is a policy designed by the nation’s apex bank that seeks to expand the money ( Naira & Kobo ) supply in our country which in turn will boost economic activities, and in addition bring about a lower

interest rate that will further support borrowing by the array of individuals (common

man on the street desiring to do his petty trading activities, even companies and banks

within the country.)

No doubt, the EMP model takes into consideration a downward movement or reduction in a country’s interest rate (MPR ) with a view to support greatly investment

opportunities which is pivotal in guaranteeing economic growth and at the same time

support borrowings, provide jobs and reduce unemployment drastically.

By lowering a nation’s interest rate (MPR), this will guarantee the principle of value for

money ( Economy, Efficiency & Effectiveness) on the part of the consumers or families

as the case maybe and which will further spur them to action to spend, thus leading to

an increase in economic activities .

 As stated under the Keynes’s theory, increases in governmental spending, reduction in taxes , and above all-monetary expansion ( ie

EMP model ) could be used to counteract an economy whose interest rate is perceived

to be very high like ours.

A well implemented monetary policy expansion (EMP) model has its attendants benefits

which may include but not limited to: facilitating economic growth on daily basis as

the sellers will be available to sell while the buyers will be willing to buy too. In addition,

it will provide easy access to funding that can be used for investment purposes and

trading activities by our business men and women within the country thus leading to a

gradual reduction in the unemployment level and facilitating business activities and

growth in the Nigerian job market which at the end will lead to an increase in the

consumption pattern of the average Nigerian man or woman on the street .

In addition, available money supply certainly will increase economic output; boost

business investment opportunities; and in all promote economic growth once more as

earlier stated. Principally, the EMP model seeks to reduce interest rate from its current

position to a lower rate and also increase money supply within the economy that will

stimulate economic growth. In conclusion, looking at the possible benefits accruable to

the EMP principle; there is no gainsaying that it is one of the veritable and trusted

measures to be adopted by any nation whose interest rates is perceived to be high like


 Ayozie, FCA, writes from Lagos 

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