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Expert advises MPC to reduce MPR by 50 basis points as inflation declines

Abuja – A Financial Expert, Prof. Uche Uwaleke has advised the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to reduce the Monetary Policy Rate (MPR) by 50 basis points.

Uwaleke gave the advice in an interview with the News Agency of Nigeria (NAN) on Sunday ahead of the MPC meeting scheduled to hold on Tuesday, July 23 in Abuja.

MPC
Mr. Godwin Emefiele, Governor, CBN; Dr. Okwu Joseph Nnanna, Deputy Governor (Financial System Stability), CBN; Mrs. Aisha Ahmad, Deputy Governor, CBN; Prof. AdeolaFestus Adenikinju, MPC Member; and Mrs. Alice Karau, Ag. Director, Corporate Secretariat, CBN; at the CBN Head Office, Abuja, on Wednesday, March 28, 2018, following the assumption of duty of the new Deputy Governors and MPC members.

He said it was also pertinent for the committee to maintain 30 per cent Liquidity Ratio and 22.5 Cash Reserve Ratio.

According to him, the call for adjustment of MPR is due to declining inflation rate from 11.35 per cent in May to 11.20 per cent in June as well as the growing external reserves and stability in exchange rate.

Uwaleke said the reduction was also necessary because of persistent bearish performance of the stock market due to high interest rates.

The expert said a gradual reduction in the MPR which was the benchmark interest rate was consistent with the CBN Governor’s pro-growth five-year blueprint which he unveiled recently.

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Uwaleke, also a professor of Capital Market at the Nasarawa State University Keffi, emphasised that further adjustment was also in line with global trend as the United States and many other economies were pursuing an expansionary monetary policy.

“Reducing the MPR from 13.5 per cent to 13 per cent will still leave real interest rate in the economy positive and it will also most likely result in increased lending to the real sector.

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“This is the expectation, especially now that the CBN is encouraging this including through specifying for banks a minimum of 60 per cent of deposits which must be channelled to the real sector,” he said.

Uwaleke noted that relaxing the MPR would also increase the Gross Domestic Product (GDP) growth which was presently put at 2.01 per cent as at first quarter of 2019.

He said that besides, the risk to inflation arising from the new national minimum wage might not crystallise while threat to food production due to farmers and herders conflict was no more as rife as it was previously. (NAN)

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