The CBN Governor, Olayemi Cardoso, announced this while
reading the communiqué of the first MPC meeting of the year on Tuesday in
Abuja.
However, in a statement issued on Thursday on his X handle,
Obi argued that tightening liquidity in the financial system does not improve
productivity, especially food production, which he claimed was the major cause
of inflation in Nigeria.
Suggesting on what to be done, the former Anambra State
governor said the most critical way to manage the high rate of inflation and
decline in production was for the government to address the issue of insecurity
in the country.
He stressed that this would allow for increased food, and
crude oil production, and an overall increase in production, which will make
products, especially food, cheaper.
The statement read: “Let me confess that the label of being
a vintage Onitsha-based trader does not in any way confer on me the status of
an economic expert.
“With my vast trading knowledge and my involvement in the
real sector, I am of the strong opinion that the recent decision of the
Monetary Policy Committee to increase the Monetary Policy Rate, MPR, to 22.5%
and the Cash Reserve Ratio, CRR, to 45% will further worsen the economic
situation of most Nigerian households as it is bound to cause more job losses
in the productive sector, especially manufacturing and other sectors that rely
on bank loans and credit facilities for their funding needs.
“Tightening liquidity in the financial system does not
improve productivity, ie food production, which is the major cause of inflation
in Nigeria. Moreover, only about 12% of N3.6 trillion of the total money in
circulation is in the banking system which means that 88%, about N3.2 trillion
is outside the banking system.
“So, this measure would rather be counterproductive as it
would not address the intended purpose of managing the money supply.
“These new measures will worsen the fragile economy as the
supply of funds would dry up for the real sector, and the new MPR rate hike
will push the interest rate on loans to above 30%, which would be very
difficult for the real sector operators especially manufacturers and SMEs to
repay; resulting, obviously, in increased bad loans, and worsening the nation’s
economic situation.
“The most critical way to manage our high rate of inflation
and decline in production is for the government to address the issue of
insecurity in the country, which will allow for increased food, and crude oil
production, and an overall increase in production, which will make products,
especially food, cheaper.
“This way, we would increase our productivity as well as
restore the confidence of FDIs and FPIs to come back to the country.
“I must caution that what the Nigerian economy needs now is
hard headed practical originality and results. Tinkering with classical
economic theories can only deepen our crisis”.
