Yemisi Izuora
Reactions have continued to grow over the Central Bank of Nigeria (CBN) tightening of monetary policy.
In the view of the Center For The Promotion Of Private Enterprise (CPPE), the timing of the policy is unjustifiable.
The Chief Executive Officer (CEO) of the Center, Dr. Muda Yusuf, while reacting to the recent announcement said, It is quite troubling that at a time when manufacturers, entrepreneurs and other investors in the economy are craving for a breath of fresh air, the CBN chose to tighten the noose on them by resorting to a further tightening of monetary policy.
Yusuf, notes that the increase in CRR to 50 per cent would constrain financial intermediation with negative consequences for the banking system and the economy.
The latest policy choice of the CBN, according to him, is at variance with the mood of most economic players and the desire to promote economic recovery and growth.
He stated that what manufacturers and other investors requiremat this time is some oxygen and stimulus, not policy measures that would worsen an already suffocating situation.
“The MPR at 27.25%; CRR at 50% and asymmetric corridor at +500 and -100 are very difficult monetary condition to bear for most businesses, given the prevailing macroeconomic and structural conditions.
“The second quarter GDP numbers showed clearly that the economy was still in a floundering mode as many critical sectors of the economy slowed.” he said.
These include manufacturing and other subsectors of the industrial sector such as cement, food and beverage, chemicals and pharmaceuticals, trade, ICT and real estate.
In addition he observed that the road transport, motor assembly, publishing and motion pictures sectors contracted during the quarter.
The Aviation, Oil Refining, textile , livestock and quarry and minerals sector were still in recession he said, adding, “Tightening financial conditions in the circumstances does not seem appropriate.”
Yusuf, advised that the private sector should not be made to pay the price of liquidity growth which they were not responsible for. Issues of excess liquidity should be addressed within a causative context.
The injection of liquidity into the system are largely public sector driven, as rightly noted by the CBN Governor.
Therefore, the focus of resolving it should be within that context. Stifling the financial conditions to address liquidity issues is detrimental to investment and growth of the economy.
The implication of the latest MPC decision for investors are quite concerning as cost funds would be further exacerbated, possibly well above 35 per cent or more and it is made worse by the increase in CRR to 50% and retention of asymmetric corridor of +500 and -100.
“We believe that the policy decisions of the CBN are most inappropriate for the prevailing economic conditions and the challenges faced by entrepreneurs in the country. The operating and production costs of businesses would be further exacerbated by the latest monetary policy tightening.” he added.
