The 252nd Meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) starting tomorrow will be the first since Nigeria economy officially drifted into a recession.
A number of Nigerians are expecting the CBN to introduce monetary policies that would help Nigeria recover from the recession that is also threatening to slide into depression.
Some experts say if the CBN doesn’t get it right now, we may be in the recession for a long time coming. While some favour relaxing policies others suggested even further tightening.
The Chief Executive Officer, Coral Spring Group, Ahmed Yusuf said what the MPC should do at the moment is to relax the money supply, in other words to allow money to circulate as against the selling of treasury bills that will mop up money in circulations.
He said the MPC should come up with policy that will encourage banks to lend more money into the system.
He said that can be possible when the CBN incentivize the lending to real sector because the banks are always sceptical lending more money during recession.
Yusuf said although the main objective of the MPC is price control, and some of the figures already indicated positive result from the last MPC meeting, but one major thing is to try to close the gap between the interbank rate and the open market rate of the Foreign exchange.
Rislanudeen Muhammad, the former acting managing director/CEO, Unity Bank and CEO, Safmur Investments Limited said the CBN is better off not focusing on inflation now but should be concerned about the MPR.
“Headline inflation for July 2016 spiked upwards to 17.6 percent, or 50 basis points over 17.1 percent recorded in June 2016 according to data released by Nigeria National board of statistics today.
“It is important to note that the pace of rise in inflation figures has gone down, now increasing at a decreasing rate thus confirming the fact that it is largely cost push rather than demand pull inflation. That has also shown that attempt to attack inflation via monetary policy instruments like monetary tightening by Central Bank has been and will continue to be an exercise in futility.”
“With stagflation and recession, loosening monetary policy by reducing Monetary policy rate, cash reserve ratio and liquidity ratio will be a better option to be taken by Monetary policy committee at its meeting next week. This can be complemented by effective fiscal stimulus and trade policies that seek to reduce rather than increase taxes at least until we get out of recession” he further explained.
He however advised that the CBN should allow the flexible exchange regime to continue even as he insists that Nigeria must spend its way out of the recession.
To spend out of recession, he said the MPR and CRR must be reduced at the MPC meeting.
But Mr. Ferdinand Ikya, financial expert, noted that “CBN has found itself in between the devil and the deep blue sea. Expansionary or contraction policies? Inflation is on the rise and there is pressure on the local currency. These two evils require tight monetary policy. This includes raising the cost of borrowing and tightening liquidity. On the other hand government is pursuing an expansionary fiscal policy to wangle out of recession.
The job of the CBN governor at present is not an easy one. That said my take is that CBN is likely to tighten monetary policy to contain liquidity overhang. Cost of borrowing and CRR may have to go up in order to arrest pressure on the local currency. Monetary policy will have to take an opposite direction. That’s my view” he said.