By Olawunmi Ashafa
Lagos – A financial expert, Dr Samuel Nzekwe, says the retention of the Monetary Policy Rate (MPR) at 14 per cent was expected and will effectively monitor the consistent inflation rate drop.
Nzekwe, a former President of the Association of National Accountants of Nigeria (ANAN), expressed the view in an interview with the News Agency of Nigeria (NAN) on Wednesday in Lagos.
According to him, the retention of the MPR at 14 per cent is logical because there is still the need to see if the consistent drop in inflation rate can be sustained.
NAN reports that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) retained MPR at 14 per cent for the 11th consecutive time.
The rate was first raised in July 2016 to combat rising inflation. The MPR is the rate at which banks anchor their lending rates.
Nzekwe said that the reduction in inflation rate and retention of the MPR rate had provided a situation whereby policy makers should look inwards to ensure thriving of the production sector.
“There is no need to be in a hurry to reduce the Monetary Policy Rate. Inflation rate is coming down, but it is as a result of the peace in the oil market.
“If there is volatility in the oil sector, particularly in terms of reduction in oil price, you will see the effect on the economy.
“In real terms, we have not achieved that level that requires the monetary policy rate to be reduced.
“This is because if there is any change in the production of oil, the impact will be felt on the economy immediately; it is when we achieve high production that external volatility will not affect us.
He suggested that the Federal Government should focus attention on improving infrastructure for the production sector to thrive.
Nzekwe said that there should also be continuous efforts to avert increase in food prices.
The former ANAN boss hailed the CBN for its plan to complement the efforts of commercial banks through support mechanism to ensure they would lend to corporate entities at a single digit rate.
The Managing Director of the Cowry Assets Management Ltd., Mr Johnson Chukwu, said that the MPC prioritised its non-expansion policy stance above real output growth consideration.
Chukwu said that the decision of MPC was because the inflation rate remained well above the target of six to nine per cent.
He expressed the hope that the MPR would help to mitigate the reversal of capital outflows by Foreign Portfolio Investors amidst monetary policy normalisation abroad.