By DAYO ADESULU
Business Advocacy Group Urges CBN to Ease Monetary Tightening
The Centre for the Promotion of Private Enterprise (CPPE) has praised the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) for pausing interest rate hikes. However, CPPE’s Chief Executive Officer, Dr. Muda Yusuf, has urged the apex bank to consider reducing rates in the future and to review the current Cash Reserve Ratio (CRR).
CBN’s Decision Aligns with Economic Expectations
Speaking in an interview with the News Agency of Nigeria (NAN) on Friday in Lagos, Dr. Yusuf noted that the CBN’s decision to maintain the current Monetary Policy Rate (MPR) aligns with economic expectations. He emphasized that recent inflation data, which showed a decline to 24.48%, supports this move.
“This is within the context of the fact that, given the recently rebased inflation rate computation, we have seen a decline in inflation to 24.48%, which is currently less than the monetary policy rate,” Yusuf stated.
He added that retaining the rates prevents further pressure on businesses and individuals who rely on bank loans.
Call for Future Reductions in MPR and CRR
While supporting the rate pause, Yusuf stressed the need for a gradual reduction in the MPR and relaxation of the CRR, which stands at 50%—the highest globally.
“It is not acceptable to have MPR rates higher than inflation. That is tightening the noose too much on investors in the economy,” he said.
He noted that key prices, including energy, diesel, Premium Motor Spirit (PMS), and pharmaceuticals, are already showing signs of decline. He believes that stabilizing the exchange rate will lead to further price reductions in other sectors, making it crucial for the CBN to reconsider its tightening measures.
Nigeria’s CRR Among Highest in the World
Expressing concerns over Nigeria’s high CRR, Yusuf compared it to Turkey’s rate of 25%, arguing that the Nigerian economy does not justify such an extreme level.
“I don’t think we should continue on that trajectory. There is no justification for it. Our economic or macroeconomic situation is not so dire as to warrant such an outrageous level of CRR,” he stated.
Additionally, he criticized the asymmetric corridor of +500/-100 basis points, arguing that if the MPR is already at 27.5%, such a wide corridor disconnects the financial system from the real economy, impacting growth negatively.
What’s Next for Nigeria’s Monetary Policy?
As the MPC gears up for its next meeting in May, Yusuf expects a reassessment of monetary tightening policies. With inflation appearing to stabilize and economic indicators showing promise, financial experts are keen to see if the CBN will adopt a more flexible approach to monetary policy.
The MPC recently retained the MPR at 27.50%, the CRR at 50% for Deposit Money Banks, 16% for Merchant Banks, and the Liquidity Ratio at 30%.
