CPPE Applauds CBN’s Decision To Pause Rate Hikes, Calls For Future Reductions

The Centre for the Pro­motion of Private Enterprise (CPPE) has commended the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) for its decision to pause rate hikes.

Dr. Muda Yusuf, Chief Ex­ecutive Officer of CPPE, in chats with Daily Independent, stated that the CBN’s decision aligns with the centre’s expec­tations.

Yusuf, in his recommenda­tion, called for future reduc­tions in rates and expressed reservations regarding the Cash Reserve Ratio (CRR).

According to him, given the recently rebased inflation rate computation, we have seen a decline in inflation to 24.48 percent, which is cur­rently lower than the mone­tary policy rate.

“It makes sense to retain the rates to avoid further exacerbating interest rate pressures on businesses and citizens with bank exposures. Going forward, we should begin to see a moderation in the rates and a relaxation of these tightening measures,” he said.

He noted that it is not ac­ceptable for the Monetary Pol­icy Rate (MPR) to be higher than the inflation rate, as this places undue pressure on in­vestors in the economy.

Yusuf stressed the need for the apex bank to gradual­ly reduce the MPR and relax the CRR during the next MPC meeting in May.

Dr. Yusuf emphasised that prices of some commodities, including energy, diesel, Pe­troleum Motor Spirit (PMS), and pharmaceuticals, are be­ginning to drop. He highlight­ed that maintaining exchange rate stability could lead to fur­ther price reductions in other products.

“The inflation outlook ap­pears better, and we expect the CBN to relax some of these rates by the next MPC meeting,” he added.

However, he expressed concern over the CRR, which stands at 50 percent— the highest globally. “There is no justification for maintaining such an outrageous CRR lev­el. Our economic or macro­economic situation is not so dire to warrant it. The closest to Nigeria’s CRR of 50 percent is Turkey’s, at just 25 percent. Going forward, the CRR needs to be reduced,” Yusuf noted.

He also observed that the asymmetric corridor of +500/-100 basis points is too wide. “If the MPR is already at 27.5 percent, an asymmetric corridor at +500 basis points is not healthy.

Continuing on this tra­jectory could practically dis­connect the financial system from the real economy, which would seriously impact eco­nomic growth,” Yusuf noted

Dr. Yusuf advised the CBN committee to re-evaluate its decisions on tightening mea­sures.

During its 299th meeting on Wednesday and Thursday, the MPC retained the MPR at 27.50 percent and the asym­metric corridor around the MPR at +500/-100 basis points.

The apex bank also re­tained the CRR of Deposit Money Banks (DMBs) at 50 percent, Merchant Banks at 16 percent, and the Liquidity Ratio at 30 percent.