CBN Raises Benchmark Interest Rate to 17.5%, Prof Uwaleke Kicks




Prof Uche Uwaleke

By Tony Obiechina, Abuja 

The Central Bank of Nigeria (CBN) on Tuesday raised the Monetary Policy Rate (MPR) from from 16.5 percent to 17.5 percent to tame rising inflation.

The Apex Bank, after its Monetary Policy Committee (MPC) meeting, also voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR,  Cash Reserve Ratio (CRR) at 32.5 per cent as well as the Liquidity Ratio at 30 per cent.

CBN Governor, Mr Godwin Emefiele Godwin Emefiele, made the announcement while addressing journalists at the end of the MPC two-day meeting which began in Abuja on Monday. 

The monetary policy rate is the baseline interest rate in an economy, every other interest rate used within an economy is built on it.

In December, Nigeria’s inflation rate fell slightly from 21.47 percent to 21.34 percent.

The Governor also announced that the Apex Bank will not extend the 31st January, 2023 deadline for return of old Naira Notes to commercial banks in exchange for the Redesigned Currency.

Reacting to the development, Prof Uche Uwaleke, said the hike in the MPR by another 100 basis points to 17.5% is not cheering news for struggling businesses in Nigeria and for output growth in general.

On a statement made available to Promptnewsonline in Abuja, Uwaleke the first professor of Capital market said given the pause in inflationary pressure, declining GDP growth, on-going implementation of cash withdrawal limit which will ultimately reduce money supply, and the fact that supply-side factors are major inflation drivers in Nigeria, he had expected the MPC to maintain status quo.

His words, “Following this development, it is expected that the banks will reprice their loans which may further jeopardise their risk assets and worsen asset quality.

“It is obvious that the CBN is heeding the advice of the IMF at the just concluded World Economic Forum where the Global financial body urged Central Banks not to pause their aggressive monetary stance.

“While doing so helps Central Banks to pursue their primary mandate of price stability, it leaves global economies vulnerable to economic recession.

For Nigeria, it goes without saying that a high interest rate environment is inimical to economic growth, job creation and the stock market.

“Regarding the deadline of January 31 2023 for the currency redesign, much as the initiative is a positive move for the Nigerian economy, I think the deadline has become unrealistic in view of the fact that the new currency notes are still not well circulated even in urban areas few days to January 31.

“So, I suggest an extension by 2 weeks to enable the new notes to reach rural communities through the agents and networks licensed by the CBN”

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