Inflation, Electioneering Cause MPR Rates Retention, Capital Market Operators Say
Some capital market operators yesterday attributed rates retention by the Monetary Policy Committee (MPC) to rising inflation and anticipated election spending.
They told the News Agency of Nigeria (NAN) in Lagos that rates retention was expected going by the economic realities in the country.
Malam Garba Kurfi, the Managing Director, APT Securities and Funds Ltd., said the retention of the Monetary Policy Rate (MPR), the Cash Reserve Ratio (CRR) and the liquidity ratio were expected due to rising inflation rate.
Kurfi said the planned minimum wage and election spending, among other reasons made the Central Bank of Nigeria (CBN) to maintain the rates. He said the apex bank should strengthen its policies and strategies to ensure stability as the general elections drew close.
Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., said the rates needed to be maintained due to the headwinds from global economy uncertainties and insecurity affecting agriculture products.
Omordion said the oscillating oil price and political spending as well as risk contributed to the rates retention.
He said the government needed to watch the country’s rising debt profile by curtailing borrowing.
“Government dominance in the financial market has not helped matter despite the relative improvement in credit to the private sector that drives economic activities.
“Government that should be the higher spender has turned to be the higher borrower with no impact on the economy as cost of servicing debts is almost equal to the budget for capital expenditure in the 2019 budget,” Omordion said.
NAN reports that the CBN Governor, Mr Godwin Emefiele, said the decision of the MPC to retain the MPR, liquidity ratio and the CRR at current levels was in the light of the observed risk confronting the economy.
This includes the global and domestic inflationary pressures which have intensified the risk of currency depreciation; the MPC was of the view that a loosening option was very remote.
“Weighing the balance of its judgement on price stability conducive to growth, the MPC felt that tightening will result in the loss of the gains so far achieved,” Emefiele said.
He noted that this might drive the banks to re-price their assets, thus increasing the cost of credit as well as elevating credit risk in the economy.
The Committee also felt that tightening would dampen investments and hamper improvements in output growth, given the already fragile growth performance so far achieved.
“In the light of the above, the MPC decided by a vote of all 11 members to keep the policy parameters unchanged from their current levels,” he said. (NAN)