The MPC meeting is scheduled for today, Monday, July 24.
While Emefiele defended the need for the MPC to retain the interest rate at double digit, experts faulted that on the grounds that it would not give the needed breather for the economy to take the expected leap leading it out of recession.
What looked like an insight into the outcome of the 257th meeting of the Monetary Policy Committee (MPC) caused some disagreement between a group of professionals and the Governor of Central Bank of Nigeria (CBN), Godwin Emefiele over the weekend.
The CBN boss, who was delivering paper at the Second Homecoming series of the Economics Department of the University of Nigeria, Nsukka (UNN), ahead of the MPC two-day meeting, as from Monday, hinted that the apex bank’s committee would not reverse itself on not tampering with both the interest and inflation rates into single units because of the complications to the banking sector and the economy generally.
This means that the inflation rate still hovering at above 16 per cent, and interest rate at 17 per cent will be retained, going by Emefiele’s word.
He insisted that CBN would be failing in one of its key mandates, if it cuts the Monetary Policy Rate (MPR) at this time.
But the Country Manager, Dragnet Consultancy International, Robert Buffet, in a chat faulted the insistence that the policy makers in Nigeria could not initiate moves aimed at encouraging more investors’ confidence.
“It sounds strange that while other economies are aspiring to attract investment by reducing high inflation and interest rates to be attractive to all investors, Nigeria is insisting on not doing anything in that direction.
” Accepted that interest rates and inflation rate can never be reversed by fiat, but there are policy choices that could achieve such.
“Among them is that government should create an enabling environment for business owners and disengage itself from running any business venture, ” Buffet said.
Not also agreeing with Emefiele is Mr Tunde Omehie, a business adviser to NACCIMMA, who said there were high hopes that MPC would at its July meeting reverse itself on the long held views that nothing could be done on high interest rate profile.
He said stakeholders could be compelled to pass vote of no confidence on MPC if it continued to meet only to rubber stamp an old template on monetary policies without a new approach.
Not impressed by the opposition voices in MPC maintaining the status quo, Emefiele said those pushing for a rate cut as a path to growth were yet to grasp the hidden facts inflecting MPC votes on vexed issue.
“Interest rates reflect not just the cost of capital but also the cost of doing business, and so we need to also look at interest rates from the perspective of the lender.
“Given that most banks have to individually provide security, power, and other infrastructure, it is not surprising that some of these costs are passed on to customers in the form of high-interest rates,” he explained.
Throwing more flight on the development on Nigerian economy, Emefiele traced the current economic challenges to external factors such as the slide in the prices of crude oil, as well as internal factors such as underinvestment in domestic productive capacity, decayed infrastructure and the challenge of persuading deposit money banks in the country to channel credit to the real sector.
These challenges, according to him, prompted the CBN to fashion out an appropriate exchange rate strategy to achieve price and financial system stability and restart growth.
To address the observed challenges, he noted that the CBN introduced policies at both the management and MPC levels targeted at stabilizing the economy.
He made particular reference to efforts made by the bank in checking the further depletion of Nigeria’s external reserves in the face of dwindling accretion and increased demand for foreign exchange.
He added that the CBN had to make the foreign exchange market flexible and priorities the most critical needs for foreign exchange.
According to him, the central bank had to restrict access to the forex market for 41 commodities, which he said the bank saw as being an unnecessary drain on the country’s reserves.
Noting that the CBN had been unjustly castigated for taking actions in the best interest of the economy, the governor said the bank would not be deterred from its objective of setting the economy on the path of sustainable development in the medium to long-term.
Emefiele said with sustained efforts by not just the CBN but also the fiscal authorities in the country, the nation’s economy would bounce back sooner rather than later, and urged Nigerians to keep hope alive as the growth indicators were becoming encouraging.
“The growth indicators are there for us to see. In January 2017, inflation was 18.8, now inflation is down to 16.10 per cent. By the fourth quarter of 2016, growth was -1.72 per cent, in the first quarter of 2017, growth had improved to -0.52 per cent which means we’ve seen an improvement in growth by 1.2 per cent, if we see another 1.2 per cent growth in the second quarter, we are out of the recession,” he said.
Continuing, he expressed dissatisfaction over the preference for consumption by many Nigerians, cautioning that Nigerians could not continue to rely on other countries for products that could be produced locally.
As a way out, he emphasized the need for the country to invest in basic infrastructure such as roads, bridges, airports, railways and information technology, adding that the country also needed to explore opportunities in public private partnerships for opportunities in infrastructure projects that could offer lucrative returns to investors and help drive economic growth across Nigeria.
However, he assured Nigerians that the CBN would continue to rely on moral suasion to encourage commercial banks to be more considerate in interest charges on customers.
The MPC meeting is scheduled for today, Monday, July 24.