Financial analysts have urged the Monetary Policy Committee of the Central Bank of Nigeria to review the benchmark lending rate and other rates at its meeting in Abuja.
The analysts pointed out in separate interviews with our correspondent that there would be adverse effects if the CBN continued to maintain its monetary policy stance.
The Managing Director, Financial Derivatives Company Limited, Mr. Bismack Rewane, said the high interest rate environment had slowed down business activities and frustrated growth in the economy.
He said, “It is with much delight that Nigerians welcome this period of declining inflationary pressures as it is believed that the MPC will succumb and bring down the monetary policy rate at this meeting.
“The MPC has limited choices in its current conservative stance, hence, we expect a marginal cut in the benchmark interest rate by 100 basis points.”
Rewane said the naira would fall under serious pressure if the CBN continued to keep the rate at 12 per cent.
The Chief Executive Officer, Fatrax Securities Limited, Dr. Wale Ositelu, said the CBN should consider reducing interest rates to stimulate medium-to-long-term economic growth.
He said, “One will expect the CBN to reduce its benchmark lending rate now.
“If the CBN maintains the current monetary stance, the possible impacts of these measures on the money market and on the fixed income securities will lead to the following: tightness in the money market; increased volatility in the inter-bank rates as the rate maintain upward trends; yields on the money market instruments will increase; new bonds in the market will command higher coupon rate; while the re-opening will command higher marginal rates, and temporary appreciation in the value of naira.”
Speaking in the same vein, the Managing Director, Sotice Investment Company Limited, Mr. Adedayo Toluwase, said the reduction in money supply through an increase in banks’ Cash Reserve Ratio without an attendant reduction in the benchmark interest rate had an adverse effect on economic activities.
He said, “The reality of the current economic and business conditions is a cause for concern – escalating unemployment crisis; profit margins are declining; consumer demand is weak; prohibitive interest rates; decelerating economic growth and high mortality rate of small businesses.
“Hence, the CBN should make a quick reversal of its monetary policies.”
The Governor, CBN, Mr. Lamido Sanusi, at the fourth annual investors’ forum organised by Renaissance Capital, said the bank was not in a hurry to loosen its stance on monetary policy, citing the need to ensure economic stability.
He explained that the banking sector watchdog did not want to send a signal that the restrictive monetary policy regime was over by lowering interest rate.
The MPC, which determines interest rate, has in the past one year kept the MPR at 12 per cent, which some analysts, manufacturers and industrialists believed was not favourable to the economy.
Also, the CRR and the Liquidity Ratio are currently at 12 per cent and 30 per cent, respectively.