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Why CBN’s MPR isn’t pro-investment
Odilim Enwegbara, Apo, Abuja
That Central Bank of Nigeria’s Monetary Policy Committee could retain the key interest rate (MPR) during their last two meetings, does not portray a serious MPC team. Or, is the economy this static or is the recession now over to warrant keeping the MPR unchanged?
Does it mean that as far as the members of the MPC are concerned the current high cost of money is okay that it needs to be encouraged? Why should what is militating against the real sector investment, investment badly needed to grow the economy out of recession, be encouraged?
Should the CBN be encouraging or discouraging high interest rate, especially given how high interest rates discourage domestic borrowing for industrial activities? The current MPR is only good for importation of finished goods since most importers can afford high interest rates in such presence of an increasingly strong naira. Is the naira strong because we are importing less and exporting more?
Why should the CBN through its interventions in the same market that is supposed to be market-driven have to artificially subsidise dollar in order to create a falsely strong naira? That is why I am of the opinion that in recessionary economies like ours, bringing down the cost of money is more important than fighting inflation blindly; after all, high cost of money is an important cause of high inflation.
So, my advice is let the MPC focus more on lowering interest rates which will increase real sector investments and grow the economy and jobs, and less on defending the naira since such a strong naira only grows our appetite for imported goods.
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Source: Punch News