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Why CBN’s monetary policy tightening is necessary – Aig-Imoukhuede

By on September 6, 2013

Group Managing Director of Access Bank Plc, Aigboje Aig-Imoukhuede says the tight monetary policy stance adopted by the Central Bank of Nigeria (CBN) is in the interest of the economy.

Addressing a media parley at the bank’s head office in Lagos, he said doing otherwise would have serious negative implications for the nation’s currency, adding that currencies like the US Dollar, British Pounds and Euro, are becoming very attractive, hence the high interest in property in those countries.

According to him, “monetary tightening means you have to raise interest rate to make your currency attractive vis-à-vis the dollar, and other currencies in the world.

“So, there are people who are going back to invest in properties… Property prices are going up in the US and Europe again, etc. The only thing the (CBN) have to do today is to tighten our monetary policy, if not our economy is going to be hammered just the same way as the Britain and the rest of the Europe.”

Speaking further Aig-Imoukhuede said over the past 20 years every time the Nigerian currency gets hammered a banking crisis follows, leading to the Naira’s devaluation. He blamed this on three major reasons: Over dependent on oil as source of foreign earnings, monotony of the foreign earnings into three arms of government and significant import dependence.

He said “Nigeria is solely dependent on oil as source of foreign currency. We monotonies this foreign currency through constitutional requirement that our foreign currency grow in to one account and the three arms of government share it and because we are not manufacturing locally, we have significant import dependent and any currency depreciation affect the cost of goods and services in Nigeria. So when people argue that when you reduce the value of foreign currency usually it is good for export, I begin to wonder on such postulation. That can be obtainable when you are manufacturing and have a diversified economy which we don’t have.”

Unfortunately when this happen, the Access Bank boss continued, “the economy will be in trauma which could lead to unemployment, the CBN knows this and it is more focus on price stability and financial system stability.

“These are challenges that are bound to cause another banking crisis. Do you think we are ready for another banking crisis?”



[Daily Independent]