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Economists hail decision to retain MPR at 12%

By BusinessNews Staff on May 25, 2014

Economic analysts on Thursday hailed the continued retention of the Monetary Policy Rate at 12 per cent, saying the measure had brought some stability to the economy.

The Monetary Policy Committee after its bi-monthly meeting on Tuesday retained the MPR at 12 per cent and the Cash Reserve Requirement of public sector fund at 75 per cent and that of private sector at 15 per cent.

An economic analyst, Mr. Eze Onyekpere, said retaining the rate at 12 per cent over a long period had set a standard for the incoming Central Bank of Nigeria governor, according to the News Agency of Nigeria

He said, “Am saying that the retention of the 12 per cent for now is okay and it will be good for the incoming governor to study what is on ground and carry every member of the committee along too. What we see now is a level of stability in the system and that is very okay.”

Also, a former Managing Director of the defunct Citizens Bank, Mr. Okechukwu Unegbu, said the decision of the committee was the best option for the economy at present.

“This rate has been stable over time, lowering it is a waste but hiking it may destroy the economy more. So, instead of lowering, they decided to maintain it.”

“But vis-à-vis the incoming governor, he is not going to change the thing overnight, he has to look at the environment and settle down to some of these issues,’’ he said.

He said the idea of devaluing the naira should not be considered at any point as such a move would be a disaster for the economy.

Unegbu said the focus must be on consolidating on the stability witnessed in system and maintain the existing rate.

He said the Nigerian economy had witnessed a lot of dislocations, such as insecurity, bad ratings at some points with some international rating agencies.

“All these compound and determine how the economy goes, so I think the rate at present is good and healthy for the economy now,’’ Unegbu said.

The Chief Executive Officer, Financial Derivatives Limited, Mr. Bismarck Rewane, said the acting CBN Governor, Dr. Sarah Alade, had performed creditably well since she took over helms of affairs at the bank.

He noted that Alade had been able to stabilise the economy in the last four months.

Rewane explained, “The MPC cited many reasons for its decision to hold the MPR at 12 per cent and the CRR deposits unchanged, including exchange rate stability and tamed inflation. While cautioning that the underlying threats to monetary stability remain potent, in our view and in the circumstance, the acting CBN Governor, Dr. Sarah Alade, has performed creditably by weathering the financial storm and turbulence of the second quarter.

“In this period, the naira lost 0.35 per cent at the parallel market, but gained 0.01 per cent and 0.89 per cent at the official and interbank markets respectively as the external reserves haemorrhage slowed considerably. However, in the past month, the naira has appreciated across all market segments.”

[Punch]

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