MPC: Expert anticipates rates retention over weak economic recovery
Prof. Uche Uwaleke has expressed optimism of rates retention at the 278th meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN).
Uwaleke, a Professor of Finance and Capital Market at the Nasarawa State University, disclosed this in an interview on Tuesday in Lagos.
He spoke on his expectations ahead of the 278th meeting of the MPC scheduled to hold on March 22 and March 23 in Abuja.
Uwaleke projected that the MPC would hold the rates in March in spite of rising inflation due to weak economic recovery which stood at 0.11 per cent in the fourth quarter.
“I expect the MPC to hold the rates in March. Yes, inflation rate is rising but economic recovery is still weak at 0.11 per cent in previous quarter.
“Also, inflationary pressure is more from cost push factors.
“I expect that the MPC will advise the CBN to continue to use development finance initiatives through increased interventions to support economic recovery especially via stimulation of agricultural output to stem rising inflation,” he said.
Uwaleke, also the President, Association of Capital Market Academics of Nigeria, said that the economy was battling with cost push inflation emanating from high transport and energy costs, insecurity and high exchange rate.
He noted that insecurity aggregates the situation via food supply shortages.
Uwaleke said that monetary and fiscal policies should synchronise to address these challenges, including ramping up agricultural output.
Speaking on high unemployment rate in the country at 33 per cent, he suggested that it was time to declare a state of emergency in the nation’s education sector.
”The solution in my view is functional education. Our youths require skills and the conducive environment to harness them,” he said.
Recall that the MPC members, at its 277th meeting in January, the first in 2021, voted unanimously to retain the Monetary Policy Rate (MPR) at 11.5 per cent.
Governor of the CBN, Mr Godwin Emefiele while reading the communiqué from the meeting, said the MPC also agreed to retain Cash Reserve Ratio (CRR) at 27.50 per cent, Liquidity Ratio at 30 per cent and the Assymetric Window at plus 100 and minus 700 basis points around the MPR.
The CBN governor had said the committee was confronted with policy choices, either to aggressively reverse inflationary pressure in the country or support measures aimed at enhancing growth and reversing the current economic recession.
“MPC agreed to reverse the inflationary trend and pursue price stability in the growing economy. MPC opined that an aggressive expansionary measure may worsen inflation and result to negative consequences on the exchange rates.
“On this basis, MPC agreed to hold all basic parameters constant.
“MPC was of the view that the CBN should pursue its strategy of systematic synchronisation of monetary and fiscal policy accommodation through its development finance initiatives aimed at mitigating the impact of the COVID-19 pandemic on Nigerians,’’ he had said.
