The Centre for the Promotion of Private Enterprises (CPPE) has described the tightening of the country’s monetary policy by the Central Bank of Nigeria (CBN) as inappropriate for investments and growth given the prevailing economic conditions.
Dr Muda Yusuf, Founder, CPPE, said this while reacting to the CBN’s decision to raise the Monetary Policy Rate (MPR) to 27.25 per cent and the Cash Reserve Ratio (CRR) to 50 per cent on Wednesday in Lagos.
BRANDPOWER reports that the asymmetric corridor is at +500 and -100 while the CBN retained the Liquidity Ratio (LR) at 30 per cent.
Yusuf said the development was detrimental to entrepreneurs, manufacturers and other investors in the economy that were craving for a breath of fresh air.
According to him, the latest policy choice of the apex bank is at variance with the mood of most economic players and the desire to promote economic recovery and growth.
Experts say MPR hike will slow down investments, economic growth
He stressed that what manufacturers and other investors needed at this time was some oxygen and stimulus and not policy measures that would worsen an already suffocating situation.
“MPR at 27.25 per cent; CRR at 50 per cent and asymmetric corridor at +500 and -100 are very difficult monetary condition to bear for most businesses, given the prevailing macroeconomic and structural conditions.
“The second quarter Gross Domestic Product numbers showed clearly that the economy was still in a floundering mode as many critical sectors of the economy slowed.
“Tightening financial conditions in the circumstances does not seem appropriate and the private sector should not be made to pay the price of liquidity growth which they are not responsible for,” he said.
The CPPE boss said that issues of excess liquidity should be addressed within a causative context.
He noted that the injection of liquidity into the system was largely public sector driven, therefore, the focus of resolving it should be within that context.
He added that the implication of the latest MPC decision for investors would further exacerbate cost of funds, possibly well above 35 per cent or more.
Yusuf said the increase in the CRR to 50 per cent would constrain financial intermediation with negative consequences for the banking system and the economy
