Why Nigeria’s Monetary policy may remain unchanged – Analyst


Abuja – The President, Time Economics, Dr Ogho Okiti, says that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) may retain existing monetary rates due to predictable fiscal policies.

Okiti, in an interview with the News Agency of Nigeria (NAN) in Abuja on Monday said that the first MPC in 2017, which was expected to end on Jan. 24, might not record any major changes.

NAN reports that the committee, which is the highest organ of monetary policy decisions, is expected to come out with the policy direction in the sector for the first time this year.

Since July, 2016, MPC failed to take any major policy change. At the July meeting, it took a major decision to increase the Monetary Policy Rate (MPR) by 200 basis – points from 12 to 14 per cent.

“I think the CBN will retain the monetary policy rates because they have exhausted their options.

“I think they will wait to see movement on the fiscal side.

“Without adequate response on the fiscal side, they can do nothing.

“Monetary policy alone cannot take Nigeria out of the economic challenges it is facing.

“So if they are not sure of the fiscal direction, the best thing that they can do at the moment is just to leave it as it is, leave all the monetary policy instruments as they are for now,” he said.

Meanwhile, Mr Godwin Eohoi, the Registrar, Chartered Institute of Finance and Control of Nigeria, said the committee should look at monetary policies that would encourage foreign and local investments.

He harped on the need to reduce interest rates hampering businesses from borrowing from banks to expand.

“Nobody wants to collect loans any longer. Even the banks are suffering it. So the current policy is not encouraging investment and this has to change for people to go and borrow money.

“Also, let the exchange rate be uniform and the gap between the interbank and parallel market be reduced.

“It’s currently too wide. It ought not be more than N25 between the two market, but now we are talking about a difference of N180 to N190.

“So, if they can close that gap, things will become cheaper for the people. Goods in the market seem to be tied to dollar. I believe that closing the gap will help us,” he said.

Eohoi also called attention to the improving price of crude oil, which is yet to have a positive impact on the Nigerian foreign exchange market and the economy.

“Right now the price of our crude oil is going up but naira is still depreciating in value.

“We were told that the problem is that we need more dollars but if our oil is going up, why can’t it have multiplier effect on our exchange rate?,” he questions.

NAN reports that market stakeholders are waiting in expectation of the outcome of the MPC, which they believe will set the pace for business in 2017.

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