Some financial experts on Wednesday said the retention of monetary policy rates by the Monetary Policy Committee (MPC) was necessary to reduce inflationary pressure and sustain current economic recovery drive.
They made the observation in separate interviews with the News Agency of Nigeria (NAN) in Lagos while reacting to the outcome of the Monetary Policy Committee (MPC) meeting which ended on Tuesday.
They agreed that it was not yet time for rates to be lowered.
Mr Sewa Wusu, Head Research, SCM Capital Ltd., said that the rates retention was anticipated by analysts with an exception of the private sector operators who canvassed for rates reduction.
Wusu said that the apex bank needed to monitor the current economic gains and moderation in inflationary pressure for sometimes before reducing the policy rates.
He said that reduction of the rates at the moment would not augur well for the economy and the country at large.
Wusu said that the rates were retained because of current fiscal outlook and expectation of more government spending once the 2017 budget was passed.
“MPC has no choice than to maintain all rates because of fiscal outlook and liquidity that will arise from government spending when 2017 is passed,” he said.
He stressed that there would be more liquidity in the system with expected government spending arising from 2017 budget implementation, noting that the rates had to be retained to maintain price stability.
Wusu, however, called for quick passage of the 2017 budget to stimulate economic activities and sustain foreign exchange gains to ensure regular supply of foreign exchange in the market.
He said that most foreign investors were still shunning the equities market due to lack of confidence about the sustenance of the current foreign exchange interventions by the apex bank.
Wusu said that the CBN was trying to ensure price stability, adding that it would take sometime before investors’ confidence in the market would be rekindled.
Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd. , said that the outcome of the meeting was expected because it would be too early to start losing the gains of the current monetary policy stance.
Omordion said that the gains of the CBN intervention needed to be evaluated and monitored before thinking of rates reduction.
He said that the apex bank should be thinking of naira exchange rates convergence to boost inflow of foreign investment, increase investors’ confidence and enhanced foreign reserves.
Omordion said that investors would continue to maintain a ‘wait and see attitude” in a country with more than five exchange rates in spite of the CBN interventions.
Dr Uche Uwaleke, Head of Banking and Finance Department, Nasarawa State University, told NAN that the rates were retained all in the bid to check inflationary pressure.
Uwaleke said that MPC needed to retain the Monetary Policy Rate (MPR) at 14 per cent to monitor inflationary trend before relaxing the monetary policy stance.
He said that it would be too hasty for the rates to be adjusted by the committee, stressing that February Inflation reduction needed to be sustained.
“The slight reduction (0.94) recorded in year-on-year headline inflation for the month of February was not ‘real’ as it was due more from ‘base effect’,” Uwaleke said.
NAN reports that the MPC in consideration of the headwinds in the domestic economy and the uncertainties in the global environment decided to retain the MPR at 14 per cent alongside all other policy rates.
Mr Godwin Emefiele, the CBN Governor, said that only one member voted to raise the MPR, adding that the committee in summary decided to retain the MPR at 14 per cent and the Cash Reserve Requirement at 22.5 per cent.
It also retained the Liquidity Ratio at 30.00 per cent and retained the Asymmetric corridor at +200 and -500 basis points around the MPR. (NAN)
JNC/TA