A financial economist, Prof. Ndubisi Nwokoma, says the CBN Monetary Policy Committee’s decisions at its last meeting are a “short term” response to the Covid-19 crisis.
Nwokoma, Director, Centre for Economic Policy Analysis and Research, University of Lagos, Akoka, said the committee, at its meeting voted unanimously to retain Monetary Policy Rate (MPR) at 13.5 per cent.
It also retained Asymmetric corridor at +200 and -500 basis points around MPR, CRR at 27.5 percent and liquidity ratio at 30 percent.
Reacting, Nwokoma said:”I think the CBN is trying to play a middle-of-the-road act trying to trade-off its core function of maintaining price stability (fight against the rising inflation) and the need to stimulate production due to the adverse economic effects of the COVID-19 pandemic.
“Lowering the Monetary Policy Rate, for example, would have been the appropriate thing to do at this time.
“Once the MPR is lowered, it will stimulate production and domestic demand but this would have the consequence of hiking inflation.
“Managing the rising inflation would have required a slight increase in MPR,” he said.
He urged the committee to review its decision at its next MPC meeting.
The Managing Director, BIC Consultancy Services, Dr Boniface Chizea, on his part, commended the apex bank for being proactive in the emergency environment fostered by Covid- 19 pandemic.
He said the meeting in this context was “simply a formality to keep fidelity with scheduled calendar as MPC degrees of freedom to act was strictly restricted.
“It could not lower MPR against the background of rising inflationary pressure,” he said.