With the Nigerian economy still languishing in recession and rising unemployment rate, analysts have stressed that there is more urgent need to stimulate economic growth in the country than fight inflation after the Monetary Policy Committee decided to retain monetary rates for the six consecutive times last week.
Mr Godwin Emefiele, Governor, Central Bank of Nigeria (CBN) at the end of the MPC meeting, which he chaired, explained that members voted 6-2 to maintain Monetary Policy Rate (MPR) at 14 per cent, Cash Reserve Ratio (CRR) and Liquidity Ratio at 22.5 per cent and 30 per cent respectively, because the Nigerian economy was still very fragile. While the apex bank targets 6-9 per cent rate, the country’s inflation was 16.1 per cent in June and the economy contrasted -0.52 per cent in the first quarter of 2017.
But the organized private sectors have been pushing for the reduction of cost of funds, which they claimed was as high as 26 per cent in commercial banks. This has been hampering the growth of the country’s real sector, with unemployment rate standing at 14.2 per cent at the end of 2016. Over 65 per cent of Nigeria’s estimated 190 million population, are below 30 years and unemployment was higher for people between 15-24 years, according to data from National Bureau of Statistics.
The CBN is more interested in curbing inflation than growing the economy, but the present interest rate was too high and inhibits growth, Professor Leo Ukpong, Dean, School of Business, University of Uyo said through telephone from Uyo, Akwa Ibom State. “My position has always been, go for economic growth and when the economy starts performing then, go after inflation. You will destroy the economy by going after inflation during recession, because growth will always take care of the system, but inflation will destroy everything.”
Dr. Biodun Adedipe, Managing Consultant, B.Adedipe and Associates Limited, argued that “We should give more attention to growth and that is the fundamental trade of economy management. They (CBN) looking at it from the point of view of keeping rates high as the only avenue to continue to control liquidity to their target band.”
“I prefer growth than to worry my head over inflation because the economy has to come out strong out of recession.”
But Mr Ambrose Oruche, Chief economist, Manufacturers Association of Nigeria (MAN) believed the decision of the MPC to maintain status quo was the best for now. He reasoned that there was need for policy consistency for the economy to revamp. “I agree with what they have done, because any fluctuation may lead to volatility in the economy. There should be consistency for sometimes to let the economy stabilize. The economy is still very fragile and any change in any indices or variable will throw thing upside down,” said Oruche.
In the same vein, Bolanle Olutosin, Research analyst, Financial Derivative Company Limited, said it was wise the MPC retained rates to enable the economy stabilize. “Hope that interest rate would decline in the September or November meeting of the MPC,” she opined.