The Lagos Chamber of Commerce and Industry has called on the Central Bank of Nigeria (CBN) to reduce its benchmark interest rate, the monetary policy rate (MPR) to boost private sector credit, domestic demand, employment and economic growth.
In statement, LCCI President, Goodie Ibru, observed that since the last MPC meeting held in September, there has been a steady decline in aggregate credit to the economy and private sector in particular.
“Aggregate net credit by banks to the domestic economy fell by 2.7 per cent and 0.1 per cent in the second and first quarter of the year respectively.”
“This is largely due to the sustained monetary tightening, significant rise in government domestic borrowing, and attractive yield of government bonds and treasury bills. The tight monetary policy stance continues to keep funds out of the reach of the private sector. With the planned issue of Treasury Bill to absorb all maturing bills in the fourth quarter, liquidity is expected to remain tighter with the private sector at the receiving end,” he said.
“Contrary to our yearnings for a relaxed monetary regime, the Monetary Policy Committee (MPC) kept all the key monetary policy variables unchanged.
The committee affirmed that its decision at the last MPC meeting in July have had desired effects on inflation, stability of short term interest rates, build-up of the external reserves and the stability of the exchange rate.
MPC held MPR unchanged at 12 percent, sustained the symmetric corridor at 200 basis points, retain Cash Reserve Ratio (CRR) at 12 percent and minimum liquidity ratio is retained at 30 percent. Since July 2010, the MPC has adjusted the MPR by 100 percent from 6percent to 12 percent currently.
“According to the MPC, three key issues accounted for the decision to hold the monetary policy variables unchanged. First, the relative stability of the foreign exchange market has helped boost accretion to the external reserves and the MPC hopes to sustain the trend as a measure against shocks from the fragile global economy.
Secondly, the increasing inflow of hot monies into the Nigerian economy portends a risk for exchange rate volatility in the event of sudden reversal with implications for price and financial market stability. Also, the persisting high core inflation was viewed as a hindrance to commence a reversal of monetary tightening.
“While we hope that our concerns do not degenerate before the next MPC meeting scheduled to hold in November, it is important for the monetary authority to commence an adjustment of monetary policy course, albeit gradually, towards boosting private sector credit, domestic demand, employment and growth,” he said.