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Likely Money Policy Rates retention in future reasonable — Utomi


Likely Money Policy Rates retention in future reasonable — Utomi

Pat Utomi

An economist, Prof. Pat Utomi, has said the likely retention of the Monetary Policy Rates (MPR) for a while at 14 per cent was reasonable due to non-availability of pressure on the economy.

Utomi told the News Agency of Nigeria (NAN) on Wednesday in Lagos that the MPR was not critical at the period, adding it was not a critical factor because Nigerians were not borrowing.

According to him, many people are looking at the uncertainties in the country and waiting to see attitude to the economy.

Utomi said: “At this particular point in time, I think the Monetary Policy Rate (MPR) is quite muted. In a situation like this, if there is any action to take, it is either you stay where you are or CBN tries to incentivise people to do things.

“We’ve got into a terrible mood in Nigeria where nine months into election, people stopped investing and for 14 months after to assess how things are settled.

“So, in that period, unfortunately, incentives are what the monetary policy guideline is supposed to do. This is either to stimulate or bring about contraction in money supply to manage inflation not very critical.”

He added that presently, what was typical about an election year was a lot of money being pumped into the system but that had stopped because of the disposition of the current leadership.

“I think it is good relative to the madness that election is becoming in our country. There is really no pressure to curtail money supply from the politicians in the system.

“More importantly, there is not any investment going round that the economy could become over heated. It is reasonable to see the retention of the current rates by the MPC,” he said.

NAN reports that the the Governor of the Central bank of Nigeria (CBN), Mr Godwin Emefiele, said the decision of the MPC to retain the MPR, liquidity ratio and the Cash Reserve Ratio 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 reprice their assets; thus increasing the cost of credit as well as elevating credit risk in the economy.

“It will also worsen the position of non-performing loans of the banks. The Committee also felt that tightening will 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 eleven (11) members to keep the policy parameters unchanged from their current levels.

NAN also reports that at the end of the November meeting, the MPC maintained all its policy rates, retaining the Monetary Policy Rate (MPR) at 14 percent, with the asymmetric corridor at +200 and -500 basis points around the MPR.

It retained the Cash Reserve Ratio (CRR) and Liquidity Ratio (LR), at 22.50 per cent and 30 per cent respectively. (NAN)


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