Why CBN’s MPC continuous hike of interest rate is troubling – CPPE

By Grace Alegba

The Centre for the Promotion of Private Enterprise (CPPE) has warned the continued rate hikes by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria, CBN, could further stifle economic growth.

CCPE said this in reaction to CBN’s sustained tightening of the Monetary Policy Rate (MPR) on Tuesday.

The MPC of the CBN, during its 298th meeting, further raised the country’s interest rate to 27.50 per cent from 27.25 per cent.

It, however, retained the Cash Reserved Ratio (CRR) at 50 per cent for Deposit Money Banks and 16 per cent for merchant banks.

The committee also retained the Liquidity Ratio at 30 per cent, and also the Assymetric Corridor at +500/-100 basis points around the MPR.

Dr Muda Yusuf, Chief Executive Officer, CPPE, stated in Lagos on Tuesday that the continued rate hikes by the Monetary Policy Committee (MPC) could further stifle economic growth.

“It is troubling that despite the declining growth performance of many critical sectors of the economy as evidenced in the third quarter GDP report, the MPC still continued its tightening stance.

“The GDP sectoral performance report also revealed a glaring disconnect between the financial services sector and the real economy,” he said.

He said that the financial services sector recorded a growth of 32 per cent while agriculture and manufacturing grew by 1.14 per cent and 0.92 per cent.

Yusuf said, “This disposition will deepen this distortions. Meanwhile strategic economic sectors such as agriculture, manufacturing and real estate recorded declines in growth in the third quarter.

“Air transport and textile remained in recession. These sectors need monetary and fiscal support, not a further tightening of monetary conditions.

The financial expert called on CBN to increase support for development finance institutions to address financing challenges caused by the sustained tight monetary policy regime. (NAN)