Employers under the aegis of the Nigeria Employers’ Consultative Association have decried the retention of the nation’s Monetary Policy Rate at 14 per cent, saying it had increased the cost of business financing.
Speaking on the state of the economy at a press conference in Lagos, the President, NECA, Mr. Larry Ettah, called on the Central Bank of Nigeria to introduce policies that would encourage lower interest rates and stimulate economic activities.
The Monetary Policy Committee in July 2016 increased the MPR by 200 points and had pegged it at 14 per cent to combat inflation and stimulate growth.
Ettah said, “One consequence of the monetary authorities’ fixation on maintaining an artificial fixed exchange rate has been the high interest rate regime. The CBN has maintained monetary policy rate at 14 per cent in spite of the economic recession, which would have suggested a different policy response – lowering interest rates to stimulate economic activities.
“We believe that within the context of our previous preference for a floating exchange rate system as the ideal policy response in our circumstances that it is time for the CBN to abandon its monetary tightening posture and move towards a monetary easing and a lower interest rate regime in order to boost productive activities in the economy.”
Ettah also expressed concern over the rising domestic and foreign debts and the servicing obligation that made up 35 per cent of total budgeted revenue in both 2016 and 2017, saying that the Nigerian government’s borrowing was unsustainable.
While commending the government on the success of the oversubscribed $1bn Eurobond, he said the over seven per cent coupon on the bond was highly priced.
He said, “In our opinion, the sustainable funding strategy for the Nigerian economy should focus on private investment or Foreign Direct Investment rather than concentrating on unsustainable borrowings. Government may also have to review its tax policy.”