Raising the monetary policy rate by yet another 150 basis points suggests the Central Bank of Nigeria ’s appetite for short-term foreign exchange inflow is far from abating.Raising the monetary policy rate by yet another 150 basis points suggests the Central Bank of Nigeria ’s appetite for short-term foreign exchange inflow is far from abating.
Some analysts said the government is lazy, saying the business community is being punished because the government has refused to imbibe the idea of fiscal responsibility. While he agreed that headline inflation may seem to be moderating, food inflation has remained a challenge, saying: “When you go down to the specifics in terms of food, in terms of core, in terms of headline inflation, you see that it is moderating and decelerating in increment…”
His reasons, he said: “My prayer was for the MPC to pause the rate hikes for several reasons. First, previous rate hikes have been quite aggressive, hurting output and real sector investments. Most economic operators with credit exposures to the banks have not recovered from previous hikes. Interest rates were already around the 30 per cent threshold.
“Naturally, a rigid monetarist disposition by the Central Bank is expected. But we need to reckon with the costs to the economy. Hopefully, with the positive outlook for domestic refining of petroleum products, we may begin to see a moderation in energy costs and a pass-through effect on the general price level. This is one silver lining that is on the horizon at the moment.
He argued that the Minister has failed to tap on central bank overdrafts to finance budget deficits with a revenue performance that fell short more than 80 per cent in Q1 and ramping up on backward integration for components for blending fertiliser, providing feedstock for domestic refining to reduce the $2.4 billion monthly that is funding the nation’s energy basket.
A financial analyst, Abubakar Umar, insisted that given the dilemma confronting the CBN, raising the rate is difficult and business will suffer, saying reducing it is not an option. “This is a cruel joke gone too far off the mark. The autonomy of the CBN and its MPC was not granted by law to impose severe hardship on the Nigerian people. The CBN, MPC and the administration know what to do to restore the value of the naira, reduce inflation and get the economy back to work. Even if the MPR were to be doubled today, inflation would still be escalating and the naira would still be depreciating,” he said.
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