Abuja – Prof Uche Uwaleke, an economist, has said that the recently increased Monetary Policy Rate (MPR) will jerk up the cost of servicing the country’s domestic debt as bond yields go up.
Uwaleke said this in an interview on Thursday in Abuja.
“The stock market will be impacted negatively as equities become less attractive to portfolio managers as an asset class due to increase in bond yields and fall in bond prices.
“Also in the coming weeks, without a counter fiscal stimulus, I expect to see a bearish stock market,’’ he said.
Uwaleke, who is a lecturer at the Nassarawa State University, Keffi, explained that the decision by the Monetary Policy Committee (MPC) would also impact negatively on the banks.
He said,“the banks will be the worst hit as the increase in MPR will automatically lead to another round of credit squeeze within the system.
According to him, the move was not favourable for the country, following its present state of technically being in recession.
He said that it was not also expected for a government that was desirous of encouraging the growth of SMEs in the country.
“In my humble view, the outcome of the MPC meeting inspires little prospects for early economic recovery.
“ I had expected some easing of monetary policy or at the worst an unchanged MPR in view of the slump in GDP.
“With the benchmark rate jumping from 12 to 14 per cent, the CBN has clearly chosen to focus on inflation rather than growth, unfortunately; this approach will most likely miss the target,’’ Uwaleke said.