Lagos – Some financial experts on Tuesday commended the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) for rate retention saying that hike would escalate foreign exchange crisis.
They told the News Agency of Nigeria (NAN) in Lagos that the nation’s foreign exchange problem would escalate with rate hike.
NAN reports that the MPC retained the Monetary Policy Rate (MPC) at 12 per cent, while Cash Reserve Requirement (CRR) and liquidity ratio were also retained at 22.5 per cent and 30 per cent, respectively.
The committee also asked the CBN to work on a flexible exchange rate system, with no mention of devaluation, adding that details of the framework would be released at appropriate time.
The MPR is the benchmark interest rate at which the CBN lends to banks to cover their immediate cash shortfalls.
Mr Okechukwu Unegbu, former President, Chartered Institute of Bankers of Nigeria (CIBN), said that rates increase would worsen the nation’s economic challenges.
Unegbu stated that foreign exchange crisis was the major problem of the country at the moment, noting that the margin between the official rate and parallel market rate needed to be curtailed.
According to him, premium on foreign exchange at over 100 per cent when compared with the official rate is outrageous.
On devaluation, Unegbu said that devaluation would not be favourable to the country because of its mono-economy.
He explained that Nigeria was not producing anything that could be exported, adding that devaluation would not bring any advantage at the moment.
Unegbu urged the Federal Government to pursue diversification programme and strengthen the agricultural sector.
“We can devalue when we have agriculture produce we can export to other countries,” he added.
He stated that the country was already in recession and called on the three tiers of government to embrace cost efficiency mechanism.
Unegbu said that state governments should think inwards to increase their internal generated revenue (IGR) and must not depend on federal allocations.
Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., said that the money market rates would remain less attractive with the rates retention.
Omordion explained that there would be movement of funds into the stock market especially with the expected stimulus package or palliative measures from the government.
He added that strict implementation of the 2016 budget, if sustained, would improve stock market activities.
Omordion said that “the only fear is that how long will it take government to push the stimulus package or palliative measures into the economy.” (NAN)
