Economy

Interest rate hikes will cripple Nigeria’s economy – Experts warn CBN ahead of MPC meeting

Some financial experts have warned against further Monetary Policy Rates hikes ahead of Monday’s meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN).

According to NAN, Professor Uche Uwaleke, a lecturer at Nasarawa State University, and Mr Okechukwu Unegbu, a past President of the Chartered Institute of Bankers of Nigeria (CIBN), disclosed this on Sunday.

DAILY POST reports that CBN will hold its first MPC meeting on Monday and Tuesday under President Bola Ahmed Tinubu amid rising inflation and forex volatilities.

With 22.79 per cent of June’s inflation rate and May’s 18.5 per cent MPR, experts stressed that further hikes in interest rates would hurt investors, businesses and the economy.

Uwaleke said MPC should halt all attempts to increase MPR further.

“So, economic growth and jobs are already negatively impacted such that a further monetary policy tightening would only worsen the situation.

“Cost of capital will further increase, and access to credit by small businesses will become more difficult,” he said.

“In this regard, the balance of risks dictates that the MPC should pause the policy rate hikes, which has been on since May last year, by maintaining a hold position on all policy parameters.

“This can be done through policies geared towards fostering a low-interest rates environment while keeping an eye on inflation, using a mix of heterodox measures.”

On his part, Unegbu said MPC should lower the MPR to allow easy access to credit for the economy’s productive sector.

Unegbu said since banks’ lending rate depends on the MPR, lowering it would benefit economic growth by allowing easier access to funds for manufacturing and small businesses.

He, however, said that the idea of Deposit Money Banks, DMBs using the MPR to decide their lending rates should also apply to interest rates on savings.

“The banks use the MPR to increase their lending rates, but savings interest rates are always meagre.

“Interest rates on savings should guide the banks on their lending rates. They should look at the average interest rate on savings to consider their lending rates.

“I expect the MPC to reduce the rates this time so that banks can reduce their lending rates to encourage lending to the economy’s productive sector,” he said.

Raufu Musliyu

Raufu Musliyu is the Editor-in-Chief of News Flash Media Service. He is a PhD Student of Al-Hikmah University, Ilorin in the field of Mass Communication. Musliyu holds Masters of Science (M.Sc) Degree in Mass Communication majoring in Public Relations/Advertising. He also holds Bachelor of Science (B.Sc) and Higher National Diploma (HND) in Mass Communication. The Editor-in-Chief also bagged Post-Graduate Diploma (PGD) in Public Relations. He is an Associate of Nigeria Institute of Public Relations (NIPR) and Advertising Regulatory Council of Nigeria (ARCON). Musliyu is the Head of Corporate of Affairs & Administration of Abdulrauf Jimoh & Co.

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