February 26, 2024

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Experts Urge CBN to Revise its Monetary Policy to Lower Inflation


CEM REPORT | Ahead of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) bi-monthly meeting financial experts have urged the apex bank to adopt a more realistic approach to its policy decisions.

According to News Agency of Nigeria (NAN), a past President of the Chattered Institute of Bankers of Nigeria (CIBN), Okechukwu Unegbu, said the idea of retaining the same parameters for several months without any positive economic impact gave the impression that the MPC meetings were merely routine.

He urged the committee to carry out extensive research on the economy and formulate home-grown policies that will slow down inflationary trend and engender real economic growth before coming out with its parameters.


Unegbu further added that the MPC should observe and compare economic conditions preceding its last few meetings and the impact of its policy decisions afterwards.

“Retaining the same parameters for such a long time without visible improvements indicates that the committee, and the apex bank are not doing enough.

“Look at the inflation rate, look at the exchange rate, there has not been any appreciable improvement.

“They need to carry out a research and compare two or three past meetings to know the impact of their policy decisions,”

He also advised the apex bank to cut down on its intervention in different economic sectors so as not to “cause dislocation in the monetary system”.

“CBN’s interventions have not changed anything; the interventions are not working.

“Look at the CBN appealing to farmers to pay back their loans. Does the apex bank have capacity to recover those loans?

“The beneficiaries do not see them as loans, but as their own share of the national cake,”

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Dr Tope Fasua an economist, urged the MPC to be circumspect in its policy decisions so as not to worsen the situation.

“Except we want the CBN to be adventurous, if they increase the Monetary Policy Rate (MPR), it’s a cue for the Deposit Money Banks to increase lending rates.

“And, usually, lending rates will be increased a lot more than deposit rates.

“The manufacturers and other stakeholders will blame the apex bank for making their lives more difficult. But if they do that, the aim could also be to slow down inflation.

“The second point is that, if they reduce, inflation might continue to grow. If we want to be experimental, we could push for a reduction in rates,”

He further suggested reduction of interest rates which would boost productivity by encouraging people to borrow more from the banks, while depositing less.

“Our banks are fairly comfortable, but we could do with a lot more productivity in the country, at the risk of a little more inflation,”

MPC had retained the Monetary Policy Rate (MPR) at 11.5 percent and held all other parameters constant at its last nine meetings, leaving the asymmetric corridor at +100/-700 Basic Points around the MPR, the Cash Reserve Ratio (CRR) remained at 27.50 percent and the Liquidity Ratio remained at 30.00 per cent according to a NAN reports.

From the last MPC meeting in March, its 10 members present were divided on the policy decisions and parameters to adopt.

While three members had voted to raise MPR by 25 basis points, one member voted to raise MPR by 50 basis points while six other members voted to hold all parameters constant.

The CBN Governor, Godwin Emefiele, said the committee was of the view that increasing the rates during inflation could adversely impact on economic recovery and stifle expected investment expansion.

He added that that tightening would reverse the steady improvement recorded in credit expansion, and it will not necessarily tame inflation.

The Governor also said the committee decided to adopt a precautionary policy stance that is consistent with the prevailing economic conditions.

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